US Economy Showing Some Growth in Q1

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The Hutchins Center Fiscal Impact Measure (FIM) is now updated with the latest economic data. The FIM is a tool created by experts at the Hutchins Center to illustrate how much fiscal policy adds to or subtracts from overall economic growth, which grew at +3.2% in Q1, subject to revision according to data just released. This will call for further analysis in the coming days, but consumer spending was weak -real domestic final sales grew but 1.3% when annualized  – and questions remain. For example, the Dow Jones industrial average gained a mere  was off 0.06% last week. (View the updated FIM)

Government spending and tax policies – particularly at the state and local level – added three-fourths of a percentage point to growth in inflation-adjusted gross domestic product (GDP) in the first quarter of 2019, according to the latest reading.

The most recent data indicate that while the waning effects of federal legislation and the partial government shutdown in January 2019 weighed on some components of the FIM, investment by state and local governments has continued to add to GDP growth.

Contribution of Fiscal Policy to U.S. GDP – Hutchins Center. Click to Enlarge.

Federal spending has risen only modestly over the last four quarters and made no net contribution to GDP growth in the first quarter. Non-defense spending declined by 6 percent in the first quarter, partly reflecting the effects of the partial government shutdown. Increases in spending on national defense offset these declines, however, so that the net impact on GDP was about zero. The most recent FIM reading suggests the contribution to GDP growth from increased federal spending last year has diminished significantly in recent quarters.