America’s $17 trillion economy expanded at a slower pace in the fourth quarter than had been projected.
Real gross domestic product – the value of all goods and services produced adjusted for inflation – rose at a 2.6 per cent annualised rate, breaking a two-quarter streak of growth at an above 3 per cent pace. That was the slowest pace of economic expansion since the first quarter of 2017 and missed economists’ expectations for 3 per cent growth.
The GDP figures are subject to revision as the Bureau of Economic Analysis collects more data.
GDP increased 2.3 per cent year-on-year in Donald Trump’s first year in office, short of the 3 per cent or more annual pace that the president has promised. The economy added 2.1 million jobs last year, compared with 2.2 million in 2016. “After years of stagnation, the United States is once again experiencing strong economic growth,” Mr Trump said on Friday at the World Economic Forum’s annual meeting in Davos, Switzerland. The US economy has grown every year since 2009 when it contracted 2.8 per cent.
The Trump administration and Republicans are putting their hopes in the $1.5 trillion tax cuts, passed in December, to boost growth. The Federal Reserve is expected to continue increasing interest rates under incoming Fed chairman Jerome Powell, who was confirmed by the Senate earlier this week.
Fourth-quarter GDP was dragged down by trade and a decline in inventories. Imports rose at double the pace of exports. Net exports subtracted 1.13 percentage points from GDP growth, the most in a year. A change in inventories subtracted 0.67 percentage points.
Consumer spending, which accounts for about 70 percent of the US economy, grew 3.8 per cent, the best pace in more than a year, adding 2.58 percentage points to growth. Consumers are benefiting from strong job gains and record stock prices.
Nonresidential fixed investment – which includes spending on equipment, structures such as office buildings and factories, and intellectual property – increased 6.8 per cent and added 0.84 percentage points to growth. Residential investment surged 11.6 per cent after two months of declines. Government spending rose at a 3 percent pace amid post-hurricane rebuilding efforts.
Final sales to domestic purchasers – which strip out inventories and trade, the two most volatile components of GDP – grew 4.3 per cent. The measure gives a better sense of underlying domestic demand.
The Commerce Department’s report also showed the core personal consumption expenditures, which strip out food and energy, climbed at 1.9 per cent.
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