US GDP Posted Solid Growth in Q-4 

US GDP Posted Solid Growth in Q-4 

US GDP Posted Solid Growth in Q-4

The US economy grew at a solid rate of 2.6% in Q-4 of last year, helped by the fastest consumer spending since the Spring of Y 2016 and a big rebound in home construction.

The Q-4 advance in US GDP (gross domestic product, the country’s total output of goods and services), followed gains of just above 3% in Q’s 2 and 3 the US Commerce Department reported Friday. The latest slowdown reflected a worsening trade deficit and less growth in inventory restocking by companies.

For all of Y 2017, the economy grew 2.3%, a significant improvement from a 1.5% gain in Y 2016.

Economists are looking for even better growth this year, propelled by the $1.5-T tax cut that President Donald Trump drove through Congress in December.

The Trump Administration contends that its economic program of tax cuts, deregulation and tougher enforcement of trade laws will lift economic growth to sustained rates of 3% or better in coming years.

In the 8.5 years of the current recovery, the growth rate has averaged 2.2%, the weakest expansion since the end of World War II.

President Trump has said his tax plan will serve as “rocket fuel” for the economy by prompting Americans to spend more and businesses to step up investment.

Some economists are forecasting GDP this year will be boosted by around 0.4 percentage points by the tax cuts and roughly 0.2 percentage points in Y 2019. Beyond that, some analysts believe rising interest rates will drag growth back down to around 2.2%.

The 2.6% GDP gain in Q-4 was slightly below economists’ 2.8% forecast.

Growth was spurred by a 3.8% rise in spending by consumers, who account for 70% of economic activity. That was up from a 2.2% rise in Q-3 and was the fastest Quarterly advance since the Spring of Y 2016.

Business investment in new plants and equipment was also strong, rising at a 6.8% rate in Q-4, while spending on home construction surged at a rate of 11.6% after 2 Quarters of decliners.

The areas of strength were offset somewhat by a big increase in the country’s trade deficit, which subtracted 1.1 percentage points from growth, and a slowdown in business spending to restock their inventories, which trimmed growth by 0.7 percentage point.

Have a terrific weekend.

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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