U.S. economy grew 3.2% in early 2019, smashing expectations

The U.S. economy expanded at a strong 3.2% annualized rate from January through March, the U.S. Commerce Department said Friday, mainly because of companies beefing up their inventories and a smaller trade deficit, factors that aren’t expected to last.

Many economists initially predicted anemic growth at the start of 2019 as the partial government shutdown and a rash of extremely cold weather caused many businesses and consumers to hit the pause button on big purchases. But forecasters raised their estimates to 2.3% as it appeared that companies were restocking their inventory, an unexpected boost to growth.

President Donald Trump has vowed he can get the U.S. economy growing at an annual pace of 3% - or better. By one growth calculation he achieved that goal last year after the tax cuts and additional government spending spurred more consumer and business spending, but most experts see growth coming in much closer to 2% this year, in line with the Obama years.

After a big buying spree in the winter, companies are unlikely to keep expanding their inventory this spring, meaning second quarter growth could take a hit. The start of the year also saw a surge in U.S. exports sold abroad, a trend that few think will last. If the trade deficit widens in the second quarter, that would also be a drag on growth.

U.S. consumers are likely to be the key factor in whether the economy has a normal, subpar or extraordinary year since consumer spending drives about 70% of growth. Americans sharply pulled back in spending at the end of last year but started to buy again in March, a trend that is similar to the past few years when there has been a spring bounce.