Remember when 3% growth was considered middle of the road? Now that level is what developed nations hope for, and it doesn’t happen very often.
The government confirmed that the U.S. economy expanded by 3.1% in the first quarter, but personal consumption played less of a role than previously thought, and businesses boosted the numbers by adding inventory, hoping to stay ahead of President Trump’s next round of tariffs.
We won’t be so lucky in the second quarter.
With consumer spending growing slowly and businesses more cautious, the Atlanta Fed’s GDPNow model expects second-quarter growth to be just 1.9%. This will bring the U.S. economy full circle, back to where it was before the tax cuts, but with one major difference.
We’re now adding almost $1 trillion per year to the deficit, up from about $500 billion per year before the tax cuts.
The economic slowdown is part of the reason the Federal Reserve is expected to lower rates at least once, if not twice, this year. The move will make it hard for conservative savers who invest in CDs and high quality bonds to meet their goals.