In the first quarter of 2017, the U.S. economy grew at an annualized rate of 1.4%. Fixed investment was the main driver of growth, while inventories were a large drag. Consumer spending slowed significantly from its pace in previous quarters, but still accounted for about half of GDP growth in the first quarter. U.S. employers added a seasonally adjusted 1,079,000 jobs during the first six months of 2017, the weakest first-half performance since 2010, according to data the Labor Department, although this was only 2,000 fewer jobs than in the first half of last year.
Productivity was flat in the first three months of the year. Slumping productivity gains have led to disappointing real GDP growth this expansion.
Unit labor costs rose 2.2%. Hourly compensation, encompassing everything from salaries to retirement benefits and health care costs, also rose at a 2.2% annual rate in the first quarter.
Over the last 12 months, the all items Consumer Price Index rose 1.9% before seasonal adjustment. The core CPI was up 1.7% on the year. Core inflation appears to have moderated, as year-over-year growth was weaker than the 2.2% gain in May 2016.
Regarding the external sector, the current account deficit, the broadest measure of U.S. trade with the rest of the world, widened to US$ 116.8 billion in the first quarter of 2017, an increase of US$ 2.8 billion. In May, the U.S. trade deficit narrowed 2.3% to a seasonally adjusted US$ 46.51 billion, as exports rose to their highest level in more than two years.
The Federal Open Market Committee (FOMC) raised interest rates by a quarter point two times in the first half of 2017: in March and in June. Minutes of the June meeting suggest that the Fed’s plans for the second half of the year are less clear.