The GDP data showed growth in the fourth quarter was boosted by consumer spending, home buying, and business investments.
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The fourth quarter of 2017 clocked in at 2.6% growth.
However, for the whole year of 2017, GDP growth came in at 1.8%, the weakest since 2012, following a 1.9% expansion posted in 2016.
Trump and other Republicans sold their tax cut past year by saying it would create jobs and boost growth even more.
Exports also had a good quarter as the United States dollar continued to weaken, gaining 12.6 percent compared to the prior quarter, the largest jump in four years. The country has not experienced a negative GDP growth rate since 2009 when it shrank 2.8 percent in the wake of the recession. “Strong domestic momentum will be boosted somewhat by tax cuts, while dollar softness puts the U.S. in a great position to benefit from the global upturn in demand”.
The results show strong improvement in various sectors of the economy including the success of the president’s move to cut taxes.
This was weaker than the 3% growth rate that economists forecast and that the Trump administration set as a target.
Let’s break this down a little.
“The tax cuts look like a near-term boost to the economy, rather than a long-term structural change”, said Satyam Panday, an economist at S&P Global, which has projected 2.8 percent growth in 2018.
The acceleration in real GDP from 2016 to 2017 reflected upturns in nonresidential fixed investment and in exports and a smaller decrease in private inventory investment. “I think you can go to 5 percent or 6 percent”.
Earlier, expectations were that the economy would expand by 3 percent in Q4, and the actual report could exceed expectations, pointing to a growth more in line with the previous quarters.
The report also shows the effect of a widening trade gap on GDP. The measure gives a better sense of underlying domestic demand. People are going to buy according to their own best interests, so as long as they believe the foreign goods are a better value, that’s what they’ll buy. We had 3.2, and a lot of people thought it would take two or three years to get there. Economists had expected GDP to climb by 3.0%.
“The shadow economy includes all economic activities which are hidden from official authorities for monetary, regulatory, and institutional reasons”.
But it underperformed in the fourth quarter. “However, with unemployment already so low, it is also likely to spark higher inflation and speed the pace of Fed rate hikes slightly”.
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