US GDP Growth Accelerates In the First Quarter  On April 26, the US Bureau of Economic Analysis published its advance estimate of GDP growth, estimating the US economy grew at an annual seasonally adjusted rate of 3.2% in the first quarter of 2019, picking up from the 2.2% rate in the fourth quarter of 2018.  GDP growth in the first quarter was driven by positive contributions from personal consumption expenditure, private inventory investment, exports, state and local government spending, nonresidential fixed investment and a decrease in imports. The data shows that the US economy is healthy, but failing to reach a trade deal with China could affect future growth. [caption id="attachment_86793" align="aligncenter" width="700"] Source: Bureau of Economic Analysis[/caption] US Industrial Production Declines During the First Quarter In the first quarter of 2019, US industrial production decreased 0.3%, a sharp reversal from the 4.0% growth reported in the fourth quarter of 2018. Consumer goods output fell 3.8% in the quarter, while durable goods slumped 8.4%. Clothing was down 25.2% in the quarter, while manufacturing output slipped down 1.1%. [caption id="attachment_86794" align="aligncenter" width="700"] Source: US Federal Reserve[/caption] Personal Consumption Expenditure Decelerates During the First Quarter US real personal consumption expenditures (PCE, or consumer spending) increased at an annual rate of 1.2% during the first quarter of 2019, slowing from the 3.5% and 2.5% growth registered in the third and further quarters of 2018, respectively.  In March, real personal disposable income (PDI, income after paying tax and other deductions) decreased 0.2% year over year while real PCE increased 0.7%. The decrease in real PDI in March can be attributed to decreases in personal interest income and farm owners’ income. The decrease was offset by an increase in employee compensation and government benefits. [caption id="attachment_86795" align="aligncenter" width="712"] Source: Bureau of Economic Analysis[/caption] China’s GDP Shows Solid Growth  China’s economy grew 6.4% year over year in the first quarter of 2019, the same as the increase registered in the previous quarter and ahead of the 6.3% expected by economists surveyed in a Reuters poll. The data indicates the government’s policies to stabilize the economy are taking effect; these include reducing taxes and fees totaling ¥2 trillion, or around $298 billion, this year. The data shows the economy is coming in just at the top end of the Chinese government’s target growth range of 6.0% to 6.5% for the year, and shows resilience as we head into the remaining quarters of 2019.  However, failure to reach a trade deal with the US could present challenges to maintaining the pace of growth in the coming quarters.  [caption id="attachment_86796" align="aligncenter" width="724"] Source: National Bureau of Statistics of China[/caption] China’s Industrial Production Shows Strong Momentum In March 2019, China’s industrial production was up 8.5% year over year in real terms, well above the 5.3% rise registered in January-February 2019. Industrial production of mining and quarrying increased 4.6% year over year, manufacturing increased 9.0%, and production and distribution of electricity, heating power, gas and water was up 7.7%. The data shows China’s economy seems to be shrugging off the effect of trade tensions with the US so far, but a failure to reach an agreement could impact industrial production.  [caption id="attachment_86797" align="aligncenter" width="710"] Source: National Bureau of Statistics of China[/caption] China Per Capita Expenditure Growth Continues to Slow Accumulated per capita expenditure increased 5.4% year over year in China in the first quarter of 2019, slower than the 6.2% growth registered in the fourth quarter of 2018. Retail sales grew 8.7% year over year in the first quarter of 2019. The data indicates that the retail sector is off to a solid start in 2019, with the caveat that retail sales data does not fully capture spending on services but does include purchases by government agencies.  A broader National Bureau of Statistics of China survey of households gives a clearer picture of household spending and includes a full range of services, such as education, health care and entertainment. Growth in per capita expenditure per the NBS survey shows signs of slowing.  [caption id="attachment_86798" align="aligncenter" width="708"] Source: National Bureau of Statistics of China[/caption]