Economic & Real Estate Report – 1Q 2018

U.S. economic growth decelerated to begin 2018. The slowdown was driven by a pullback in consumer spending despite real disposable income increasing at its fastest rate in nearly three years. Economists generally believe that first quarter GDP often appears soft due to seasonal adjustments and that growth will accelerate in the upcoming quarter as the new tax cuts will support greater consumer output and continued business investment.

Despite headwinds, such as the impact of President Trump’s tariffs on imported steel and aluminum, the threat of a trade war with China, domestic political turmoil and financial market volatility, numerous closely‐watched metrics were reflective of economic strength during 1Q18.

These include:

March increases in durable goods orders, factory orders and industrial production
An increasingly tight labor market
Elevated consumer confidence levels
Rebounding March retail sales
Steady business spending and investment
Strong underlying demand for owner‐occupied housing and improving home values

Additionally, demand for U.S. exports continued to support the manufacturing sector, helped by a weaker dollar and stronger global growth.

Marking the sixth increase since late 2015, the Federal Reserve (Fed) raised its benchmark interest rate by 25 basis points (BPS) in March to range between 1.50% and 1.75%, noting that the economy continues to strengthen and that its economic outlook has improved. Fed officials acknowledged the recent firming of inflation as evidenced by a 2% YoY increase in consumer prices, which denotes a strong economy characterized by a healthy demand for goods and services.