TBAC reports economic activity remains strong

The Treasury Borrowing Advisory Committee (TBAC) of the Securities Industry and Financial Markets Association has reported to the Secretary of Treasury that economic activity grew at a strong pace in the first quarter, with a 3.2% annualized increase in real GDP despite an estimated 0.3 percentage point drag from the government shutdown. The strength resulted in part from rapid inventory accumulation and a large decline in imports, factors that are likely to reverse, and domestic final sales grew at a slower 1.4% pace. Looking ahead, both the growth drag from the large tightening in financial conditions last year and the growth boost from tax and government spending legislation are likely to fade. Growth is likely to slow over the remainder of 2019 from the 3.2% pace seen over the last four quarters, but is expected to remain somewhat above estimates of the economy’s longer-run potential.