United States economic growth in Q4 revised down to 2.2 pct

Paul Johnson 
Tomorrow’s Guardian The mess that is Brexit

Paul Johnson Tomorrow’s Guardian The mess that is Brexit

The U.S. fourth quarter economic growth was downwardly revised in the third estimate on lower domestic activity.

The Commerce Department reported U.S. GDP growth of just 2.2 percent in the fourth quarter, down from the 2.6-percent estimate originally reported a month ago.

For all of 2018, real US GDP expanded at a pace of 2.9%, versus 2.2% in 2017, yet the price index for gross domestic purchases accelerated only slightly, from 1.9% to 2.2%.

In the third quarter of 2018, the USA real gross domestic product (GDP) increased 3.4 percent. The Trump administration's fiscal stimulus in the form of $1.5 trillion in tax cuts and more government spending has now worn off.

Unfortunately, the drop-off between the third and fourth quarters was steeper than expected.

Government investment fell at a 0.4 percent rate, instead of growing at a 0.4 percent pace as previously reported. The revisions to the fourth-quarter reading reflected markdowns to consumer and business spending, as well as government outlays and investment in homebuilding.

According to the Commerce Department, the country's economic growth had peaked around the second quarter of past year, reaching almost 4.2 percent.

Last week, the Fed left interest rates unchanged after concluding a two-day policy meeting, maintaining the target range for the federal funds rate at 2.25 percent to 2.5 percent.

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Corporate profits fell by $9.7 billion in the fourth quarter, after an increase of $78.2 billion in the third quarter, but finished the year up 7.8 percent.

Per-share profits rose 16.9% year-over-year in the fourth quarter for the biggest US publicly traded companies, according to financial-data firm Refinitiv. "I think you can go to 5 percent or 6 percent", Trump said in a debate back in 2016. The United States economy only grew slightly at the end of past year.

The report kept intact an economic milestone that President Donald Trump has boasted about, as the Republican-backed tax cuts helped bring full-year growth to 3%, as measured on a fourth-quarter-over-fourth-quarter basis.

Investment in residential construction was revised to show it contracting at 4.7 percent rate instead of at a 3.5 percent rate, marking the fourth straight quarterly decline.

Growth forecasts for the first quarter are as low as a 0.9 percent rate. Moreover, strong labor markets and wage growth, a high saving rate, and sound household balance sheets taken together are possibly to keep consumer spending supported in the quarters ahead.

Sal Guatieri, senior economist at BMO Capital Markets, called the GDP report "somewhat disappointing" but said some of the fourth quarter slowdown came from the 35-day partial government shutdown. Thus, this category deducted 0.1 percentage point from GDP.

The report showed that consumer spending slowed to a solid growth rate of 2.5 per cent in the fourth quarter.

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