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Private investment drives first-quarter GDP as personal spending softens

Friday’s first-quarter 2018 Commerce Department’s release showed a 2.3% year-over-year increase in the U.S. gross domestic product. The number was lower than the prior three quarters but still ahead of the consensus estimate of 2%. Two themes to note in the underlying components are the growth of consumer spending and private business investment.

Private business investment grew 0.73%, well below historical numbers. Consumer spending is the backbone of U.S. economic growth and has historically seen relative dips in the first quarter. Gross private investment led the four major GDP components with its fourth consecutive positive quarter and sixth in the last seven quarters. The GOP tax law will likely have a positive impact on both personal and business spending further into 2018.