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What Q1 GDP Tells Us About the Economy (and What It Doesn’t)

The state of the economy and the state of the real estate industry may not be following an identical trajectory, but they’re correlated closely enough that it’s well worth it for those interested in how commercial real estate is doing to keep an eye on how the economy is doing.

So how exactly is the economy doing?

There are, of course, many ways to answer that question that take into account a wide range of variables, including retail sales, job growth and manufacturing. But one of the primary economic indicators is gross domestic product… and the latest GDP numbers might make you go hmm.

GDP grew at an annual rate of 2.3% in Q1 ‒ down from 2.9% in the previous quarter and below President Donald Trump’s targeted growth rate of 3% and from the Federal Reserve of Atlanta’s January forecast of a whopping 5.4% GDP rate in the quarter. (More moderate expectations of 2% growth, though, were exceeded.)

At the same time, consumer spending, another key economic indicator, had a sluggish first quarter, slowing from 4% in the previous quarter to 1.1%

But dig a little deeper, and you’ll find factors that could point to greater growth in the current quarter and the rest of the year.

“I would not lose sleep over first-quarter GDP,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania, citing the seasonality factor of soft Q1 growth. “Overall the economy is doing very well and will continue to do well this year and into 2019.”

Economists expect growth to accelerate in Q2 despite the slow start, Reuters reported, citing the effect of increased government spending and tax cuts for businesses and individuals.

Though the quarter was the first to reflect tax reforms that went into effect Jan. 1, consumers were the stingiest they’ve been in five years. Thanks to the new tax rates, consumers had 3.4% more disposable income available in Q1, but that didn’t mean they opened their wallets right away.

However, consumer spending appears to be on the road to recovery, with late April data showing that Americans did open those wallets in March. Spending rose by 0.4% in March, the highest increase in three months, as an inflation gauge tied to consumer spending advanced at the fastest pace in over a year.

Exports climbed 4.8% in Q1 vs. a 2.6% increase in imports. Yet, it’s unclear how this might change if Trump goes ahead with planned tariffs on thousands of imported goods, potentially spurring retaliatory economic measures.

Other issues to keep in mind: A rebound could already be underway, and the Federal Reserve’s March meeting showed the central bank believes Q1 “softness” will be “transitory.”

Plus, GDP estimates are revised over time. We won’t have long to wait; the first revision is set to be released May 30.

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Alex Veksler

Head of Content

Alex Veksler has 16 years of finance, data analysis and project management experience. He is a former vice president at Morgan Stanley, where he worked on product control of equity and fixed-income derivatives products as well as various projects involving finance and technology, such as revamping risk attribution and balance-sheet systems for profits and losses. Alex has previously worked at hedge funds, most recently as a director at Exigent Capital. He has a bachelor’s in computer science from Yeshiva University and an MBA from New York University.

Ely Razin

CEO

Ely Razin founded CrediFi in 2014 with Battery Ventures. A rare combination of seasoned corporate executive and technology entrepreneur, Ely previously served as global head of board governance for Thomson Reuters Accelus and head of business law for Thomson Reuters, after the software company he founded was acquired in 2004. The company, Expert Ease Software, developed AI-based software that automatically summarizes key deal terms for transactions in fields including capital markets, M&A and real estate. Ely began his career as a corporate and securities lawyer, and holds an LLB and MBA from York University.

Frank Muhlon

Head of Transactions

Frank Muhlon oversees CredifX, the commercial real estate financing marketplace that mines the CrediFi database at its core. Prior to joining CrediFi, Frank served as vice president of Northeast region business operations for online CRE property trading platform Ten-X, which has closed over $40 billion in transactions since its inception. He has also held key positions at Orix USA/Houlihan Lokey, Silverstein Properties and Trammell Crow Company. Frank received his master’s degree in real estate finance from New York University and his bachelor’s in finance from Rutgers University.

Charles Mctiernan

Head of Sales

Charles Mctiernan comes to CrediFi from Ned Davis Research Group and Roubini Global Economics, where he was the global head of sales. He also spent more than 10 years at Reuters America Holdings, where he held a number of senior sales leadership roles, including head of solutions sales and head of global accounts. Charles, who received his bachelor’s in economics from East Carolina University, has more than 25 years of experience in technology, data and research sales.

Amichai Levy

VP R&D

Amichai Levy is the former VP of R&D at Israeli high-tech firm Payoneer, where he developed its signature cross-border payment platform and integrated it with existing bank technology. In his prior role at Ness Technologies, Amichai was a key player in developing an electronic case filing system for Israel’s courts. He has over 20 years of experience in software engineering.

David Fajgman

Head of Finance

David Fajgman brings over 14 years of financial and managerial experience to CrediFi. Prior to joining the CrediFi team, he served as finance director of Bioness Neuromodulation Ltd., which develops and manufactures medical devices involved in neurological rehabilitation. He has previously worked in multiple finance roles at Thomson Reuters and as an accounting and consulting manager at Ernst & Young, where he was responsible for a wide range of clients, including companies listed on the Nasdaq and privately held high-tech companies. David is an Israel-licensed certified public accountant and has a bachelor’s degree in business and accounting.

Liat Bar David

Head of Human Resources

Liat Bar David has over nine years of human resources experience, primarily focused on the high-tech industry. She is a former HR business partner at semiconductor solutions provider Broadcom, where she was responsible for onboarding processes, benefits, policies, training and development, performance management and employee retention. Liat holds a bachelor’s in communication and human services and a master’s in human resources and services, both from the University of Haifa.