U.S. gross domestic product (GDP) growth remained healthy in the fourth quarter of 2019, according to new data from the Bureau of Economic Analysis. 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 2.1 percent in Q4. That was unchanged from Q3, in line with expectations, and the 11th consecutive quarter of growth at or above 2 percent. As usual it is worth mentioning that this is only the first estimate of Q4 GDP, meaning that large revisions are possible over the next few months.
Under the hood, consumer spending, which accounts for the bulk of the economy, rose by 1.8 percent in Q4, slightly worse than anticipated, and nonresidential business investment declined for a third straight quarter. The continued pullback in capital spending is not too surprising following the above-trend gains that surrounded the passage of the Tax Cuts and Jobs Act, but the declines in 2019 were likely also exacerbated by geopolitical uncertainty. Fortunately, trade tensions have eased considerably over the past month, which removes another unneeded headwind for continued growth in 2020. As predicted, inventories were also a drag on GDP, but such weakness was more than offset by a possibly transitory jump in imports (narrowing trade deficit). Altogether, 2019 was another solid year for economic growth in America. The gains could of course be larger, but growth is still growth, and quarterly GDP volatility has clearly declined recently. The “slow and steady,” “Goldilocks” nature of this record-long expansion is likely a key reason why the economy has been able to grow for over a decade with no clear signs of it ending any time soon.
Sources: Econoday, U.S. DoC, FRBSL