ARI SHAPIRO, HOST:
The U.S. economy started 2019 with a bang. A report from the Commerce Department shows the economy grew at an annual rate of 3.2% percent in the first three months of the year; that's a full point faster than it was growing at the end of last year. And as NPR's Scott Horsley reports, it's an encouraging sign that while other economies around the world may be tapping the brakes, the U.S. is still humming along.
SCOTT HORSLEY, BYLINE: The first quarter growth rate of 3.2% was better than anyone expected - well, almost anyone.
KEVIN HASSETT: Do you remember what our forecast for this year is? Three point two. And what was the first quarter?
HORSLEY: White House economist Kevin Hassett hit the bull's-eye with his growth forecast. And while there's no guarantee the rest of the year will see similar growth, President Trump couldn't help gloating, as he prepared to board his helicopter outside the White House.
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PRESIDENT DONALD TRUMP: We're knocking it out of the park, as they say, and we're very happy about that.
HORSLEY: Many forecasters outside the administration say first quarter growth was boosted by temporary factors, and they don't believe the economy will continue to grow at this pace. Economist Ben Herzon of IHS Markit notes, with demand weak early in the year, many of the goods produced during the first quarter piled up in warehouses and on store shelves.
BEN HERZON: I think what's going to happen is, after a first quarter burst in inventory building, that inventory building's going to slow down and contribute to a slowing in overall GDP growth.
HORSLEY: White House economist Hassett agrees - sometimes a buildup in inventory is followed by a slump in production. But he's counting on a jump in demand the rest of this year to keep factories and other producers busy.
HASSETT: So I'm not as concerned about the inventories as I normally would be.
HORSLEY: Consumer spending did start to heat up towards the end of the quarter, as shoppers set aside their winter concerns over the government shutdown and stock market gyrations. Jack Kleinhenz of the National Retail Federation says consumers do have the money to spend more, thanks to a healthy job market.
JACK KLEINHENZ: Every new job, we get new income into the economy, and that creates more spending.
HORSLEY: Wage gains have been solid, if not spectacular, and some of the biggest raises have gone to those at the bottom of the income ladder, who are especially likely to spend the extra cash. Fears of an all-out trade war also eased during the first quarter. Chief economist Mark Zandi of Moody's Analytics says most observers are now counting on the president to strike a deal with China and avoid a costly escalation of tariffs.
MARK ZANDI: If he fails to follow through on that, I think there's going to be a lot disappointment around the globe, stock markets will fall, and the year is going to turn out to be much less positive than anyone would expect at this point.
HORSLEY: Trade talks with China resume in Beijing next week. White House economist Hassett says the two sides are making progress towards an agreement.
HASSETT: Last time I used a wedding analogy - I said we're at the point where we don't want the groom to see the bride. But now I think we're past that point. I think now we're at the point where we don't want Dustin Hoffman to show up at the wedding (laughter).
HORSLEY: Just like that scene from the classic movie, "The Graduate," the course of the economy can offer unexpected twists. But for the first three months at least, 2019 got off to a good start. Scott Horsley, NPR News, Washington.
(SOUNDBITE OF SIMON AND GARFUNKEL'S "MRS ROBINSON") Transcript provided by NPR, Copyright NPR.
