Friday’s Gross Domestic Product report produced by the Bureau of Economic Analysis signaled the economy was strengthening. In fact, Q1's readings even surpassed the 2.4% growth estimate produced by a poll of economists conducted by CNBC and Moody's analytics.
According to the Bureau's advanced estimate, real GDP increased at an annual rate of 3.2% in the first quarter of 2019, compared with a gain of 2.2% in the prior three months.
This marks the first acceleration of growth since mid-2018, highlighting economic improvement.
The data may be showing that the economy is growing, but not fast enough to spark a level of inflation that would force the Fed to hike rates. That balanced state of "not too hot, not too cold" is known as a "Goldilocks economy," a phrase coined by economist David Shulman in the 1990s.
“First, inflation was low, indicating that the Fed had no reason to raise rates that could tip the economy into a contraction. Second, while the headline number was 3.2%, after backing out trade and inventories the number was just 1.3%, showing the economy isn't overheating, which again could prompt the Fed to raise rates," Frick said. "Finally, while the 1.3%, as measured by 'final sales to privated domestic purchasers' is a low number, it will rise with the recovery of consumer spending and some other factors. So a reasonable forecast for GDP this year is 2% to 2.5%, which, together with a strong jobs market and rising wages, point to a healthy Goldilocks economy with no looming economic issues in sight."
