U.S. economy grew faster in 2017, but growth slowed at year's end

The U.S. economy grew 2.6 percent in the fourth quarter of 2017, lower than the 3.2 percent in the previous quarter, the Commerce Department said Friday.

This was weaker than the 3% growth rate that economists forecast and that the Trump administration set as a target.

The UK economy expanded by a better-than-expected 0.5% in the last three months of 2017, official figures say.

For all of 2017, the economy grew 2.3 per cent. Even with a high global growth and a weaker dollar, exports failed to keep up with imports which nearly doubled, boosted by domestic demand.

Higher inflation makes it more likely the Federal Reserve will adopt an increasingly hawkish stance to rate setting.

"The details are much better than the headline", said Tom Simons, senior economist at Jefferies LLC. "The more fundamental elements of growth were quite strong in the fourth quarter". Businesses move in cycles of investment and consolidation while consumer confidence ebbs and flows. At the same time, "trade might be a more persistent weakness".

In another sense, though, the increase in imports is a measure of the state of American manufacturing - that USA companies are not yet operating at a level of efficiency or quality that allows them to compete as strongly as we'd like to see against foreign producers.

The bigger trade deficit during the quarter reflected imports rising at double the pace of exports. The gap between merchandise exports and imports in December was the biggest since 2008.

GDP, the value of everything produced domestically, rose at an annualized rate of 2.6%.

Trump inherited an improving economy, and during his first year in office, the trend has continued and growth has accelerated. "This is far from doom and gloom".

Consumer spending rose at a 3.8% rate in the period, an increase last exceeded in late 2014.

Government spending picked up during the quarter, adding 0.5% to growth. GDP gains are projected to cool to 2.5% as early as this quarter, according to economists' forecasts compiled by Bloomberg. Savings fell to $384.4 billion from $478.3 billion in the third quarter. The third quarter was inflated by hurricane distortions in the net exports and inventory categories. Imports, which are a subtraction in the calculation of GDP, turned up.

GDP growth figures are out today, and the economy kept up its good performance in the fourth quarter.

Business investment in equipment grew at an 11.4 percent rate, the quickest since the third quarter of 2014 and picking up from the third-quarter's 10.8 percent pace. The more-volatile categories of trade and inventories jointly managed to cut back 1.8 percentage off the growth.

The slowdown was surprising - the past two quarters had exceeded 3 percent growth - in part because so many other metrics of the economy's health had been bright recently, including the 4.1 percent unemployment rate and the stock market's seemingly unstoppable rise. Real disposable personal income increased 1.1 percent, compared with an increase of 0.5 percent.

  • Eleanor Harrison


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