U.S. gross domestic product (GDP) growth cooled in the fourth quarter of 2018, according to new data from the Bureau of Economic Analysis (BEA). Specifically, real GDP, which measures the value of the production of goods and services in America adjusted for price changes (inflation), increased at an annual rate of 2.6 percent in Q4. That was down from Q3’s 3.4 percent pace of expansion but better than expected and consistent with the recent seasonal pattern. The biggest drag on GDP last quarter was slower consumer spending growth, not surprising given December’s unusually weak retail sales report.
However, much of this was offset by a substantial gain in nonresidential business investment, e.g. spending on equipment, software, research and development. Such figures support the argument that recent tax cuts have helped extend the current economic expansion by incentivizing increased capital investment. Further, 2018 was the first year since 2004 that GDP growth was above 2 percent (annualized) in all four quarters, and the full-year growth figure was 3.1 percent, slightly better than the White House’s 3 percent goal. Looking ahead, GDP growth likely continued to moderate in Q1 due to the partial government shutdown, a weakening global economy, and the avoidable trade war. Overall, though, the current economic expansion in America still looks set to become the longest on record around mid-2019.
Sources: Econoday, U.S. DoC, Twitter, Bloomberg, FRBSL
Post author: Charles Couch