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US markets end higher after better-than-expected first-quarter GDP reading

The US markets ended higher on Friday after a better-than-expected first-quarter GDP reading. US economic growth unexpectedly showed a significant acceleration in the first quarter of 2019, according to a report released by the Commerce Department. Preliminary data showed real gross domestic product jumped by 3.2 percent in the first quarter after climbing by 2.2 percent in the fourth quarter of 2018. The acceleration in the pace of growth came as a surprise to participants, who had expected GDP to increase by 2.1 percent. Paul Ashworth, Chief US Economist at Capital Economics, said the much stronger than expected GDP growth would seem to make a mockery of claims that the US economy is slowing as the fiscal stimulus fades. Ashworth said after all, 3.2% is well above the economy's 2% potential pace and the 2.2% gain in the final quarter of last year. Looking beyond the headline number, however, there are plenty of causes for concern.

The unexpected acceleration in GDP growth partly reflected a positive contribution from trade, including a 3.7 percent spike in exports. The report also showed imports, which are a subtraction in the calculation of GDP, tumbled by 3.7 percent during the quarter. An acceleration in private inventory investment also contributed to the faster GDP growth along with a 3.9 percent surge in state and local government spending that Ashworth described as very suspicious. Meanwhile, revised data released by the University of Michigan on Friday showed US consumer sentiment dipped by slightly less than initially estimated in the month of April. The consumer sentiment index for April was upwardly revised to 97.2 from the preliminary reading of 96.9, although the index remains below the final March reading of 98.4. Street had expected the index to be upwardly revised to 97.0.

Dow Jones Industrial Average surged 81.25 points or 0.31 percent to 26543.33, Nasdaq gained 27.72 points or 0.34 percent to 8146.40 and S&P 500 was up by 13.71 points or 0.47 percent to 2939.88.

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