US GDP growth slows to 2.6 percent in fourth-quarter, missing estimates

Jan 27, 2018, 16:45
US GDP growth slows to 2.6 percent in fourth-quarter, missing estimates

The advanced official estimate of US GDP showed the economy grew at a 2.6% pace in the fourth quarter, behind economists┬┤ forecasts of 3%.

The Commerce Department said the increase in GDP in the fourth quarter reflected positive contributions from consumer spending, non-residential fixed investment, exports, residential fixed investment, and government spending.

Ironically, the disappointing GDP numbers may be the result of increased imports in the era of "America First".

Still, consumer spending, the biggest contributor to growth, grew at its fastest pace in more than a year.

There are still plenty of good signs even without getting the psychological hat trick on breaking the 3% barrier three quarters in a row. Those could all be factors, but doesn't the biggest tax reform in more than 30 years stand a pretty decent chance of making an impact as well? They went up 6.9%, with exported goods rising 12.6% for its best performance in years. Residential construction increased at a 11.6% annualized rate, contributing 0.42 percentage-point to growth.

The nations economic dashboard indicates that the United States is poised for faster growth.

Forcasts predicted the longest streak since 2005 with the third straight quarter of 3 percent-or-better growth.

Friday's report from the Commerce Department also shows an uptick in government spending, just as taxes are being lowered and the growth rate is found to be sagging.

The New York Times notes, "Combined with a sinking jobless rate, a surging stock market and a sunny outlook, the estimated overall 2.3 percent rise in the nation's output a year ago is a sign of the American economy's continuing resilience".

GDP, the value of everything produced domestically, rose at an annualized rate of 2.6% from October through December. Imports, which are a subtraction in the calculation of GDP, accelerated.

While output growth is modestly accelerating, progress is less advanced than the back-to-back GDP results exceeding 3% in the second and third quarter suggested.

The growth rate's deceleration relates to a downturn in private inventory investment.

"The data right now look very consistent with the CEA view that the economy is growing at rate that is going to be going into next year north of 3 percent", Hassett told Fox Business. The latest gain in consumer spending added 2.58 percentage points to growth. Even with steady hiring and the lowest unemployment rate since 2000, wage increases remain tepid, one reason economists expect households may take a breather from splurging this quarter.

Trump has said his tax plan will serve as "rocket fuel" for the economy by prompting Americans to spend more and businesses to step up investment. But despite this better-than-expected figure, overall, 2017 saw Britain record the slowest growth for five years.

However, the Office for National Statistics (ONS) said the broader picture was "slower and more uneven" growth.