Money

US GDP Grows 2.6%, Slower Than Forecast

January 26, 2018 16:54·
Donald Trump

Donald Trump

Officials had focused on 3 percent GDP growth as proof his economic policies were working, and Trump has said it could go far beyond that target.

The U.S. economy grew at a solid rate of 2.6 percent in the final three months of past year, helped by the fastest consumer spending since the spring of 2016 and a big rebound in home construction. The median forecast in a Bloomberg survey called for 3 percent.

Still, consumer spending, the biggest contributor to growth, grew at its fastest pace in more than a year. Investment in new housing increased 11.6%, business spending on equipment surged 11.4% and outlays on structures edged up 1.4%, according to Commerce Department data.

Economists had expected the rate to be 3% - the same as the three months to September.

Although the 2.6 percent expansion was lower than expected, it indicates that the economic growth remained steady at the close of 2017. Businesses are investing aggressively and consumers continue to spend at a very strong pace. "We're going to see short-term aberrations", he said. A fall in inventories also subtracted from GDP growth. Imports jumped 13.9%, doubling the 6.9% rise in exports.

For a better sense of underlying domestic demand, economists look at final sales to domestic purchasers, which strip out inventories and trade, the two most volatile components of GDP.

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The U.S. economy didn't grow as quickly as many economists had hoped, according to numbers released Friday by the Commerce Department. On that basis, it was the strongest annual performance since 2014's 2.7 percent.

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

With consumer spending accelerating, inflation perked up in the fourth quarter. America added 2 million jobs.

Another standout was corporate demand. The saving rate dropped to 2.6 percent from 3.3 percent in the prior period. That added 0.62 percentage point to fourth-quarter growth.

USA consumer confidence was at its highest since 2000.

One reason is that household spending will be hard pressed to accelerate further.

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