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US Economy Shows Minimal Growth In Lackluster Quarter

| by Alex Scarr

The U.S. economy has lagged in recent months, posting the lowest growth quarter in nearly three years.

According to MarketWatch, the American economy grew at a rate of 0.7% over the first three months of 2017, a marked drop off from the 2.1% and 3.5% increases over the second half of 2016. Economists at MarketWatch had predicted slow growth for the first quarter, assuming a 0.9% percent uptick.

Consumer spending did not keep pace with expectations, growing a minute 0.3%. As a response, the government reduced spending and businesses scaled back on inventory to reduce glut.

The slowdown should only be a temporary halt on what's been a robust economy in recent years. Americans spent less on gasoline, home-heating appliances, and warm weather clothes as much of the country experienced an unseasonably warm winter. With Feb. 2017 being the second-hottest on record, economists feel confident dismissing this winter spending lull as a fluke.

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Households are also more financially stable than years past, with a strong labor market and consistent wage gains buoying consumer confidence. MarketWatch also reported that an index that tracks labor costs posted the biggest gain for a first quarter in over a decade.

Consumer confidence soared in March 2017, posting the largest confidence index since 2000 amid a healthy job market and an economy-friendly president. Latest filings in April 2017, however, have shown a slight dip that has economists concerned.

"Consumer confidence ... still remains at strong levels," Lynn Franco, director of economic indicators at The Conference Board, told CNBC. "Consumers assessed current business conditions and, to a lesser extent, the labor market less favorably [in April] than in March."

"Looking ahead, consumers were somewhat less optimistic about the short-term outlook for business conditions, employment and income prospects," Franco added.

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The Consumer Sentiment Index conducted by the University of Michigan disagrees with the consumer confidence polling, however, showing April 2017 to be a slightly more confident month than March, according to Business Insider.  

The U.M. study found that, despite widespread agreement concerning the health of the economy, there remains a partisan divide about the direction of the American economy.

"Selective perception of news is the driving force behind the partisan divide. Favorable economic developments were cited by nearly all Republicans in April, while three-quarters of Democrats reported hearing negative news about the economy," Richard Curtin, the survey's chief economist, said.

The study also found that voters who identified as independents reported feeling more confident in the current state of the economy than they did before the 2016 president election.

Sources: MarketWatch, CNBC, Business Insider / Photo credit: Pixabay

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