According to numerous economists, U.S. economy will hit the 3 percent growth mark this year.
Gross domestic product – the value of all goods and services produced, adjusted for inflation – rose at a 2.6 per cent annualised rate, breaking a two-quarter streak of growth at an above 3 per cent pace.
The fourth quarter of 2017 clocked in at 2.6% growth.
Finally, there was mixed news on the worldwide front, with net exports serving as the largest drag on real GDP growth in the fourth quarter, subtracting 1.13 percentage points from the headline number.
Friday’s GDP report was the preliminary estimate.
Consumers willingly loosened their purse strings for the holiday shopping season and matching their elevated optimism, the personal savings rate fell to a low 2.6 percent in Q4, the third lowest in history (see chart below).
Peter Dixon, senior economist at Commerzbank, told the BBC: “Undoubtedly the United Kingdom is being given a lift by the strength of global – notably euro zone – demand and comes after Bank of England governor Carney implied that the UK’s slowdown may be more temporary than previously supposed”.
That was better than the 1.5% posted in 2016, but well short of President Donald Trump’s 3% target.
A surge in imports was blamed for the slowdown, which meant growth for 2017 came in at 2.3%.
In 2019, the International Monetary Fund projects that the Colombian economy will grow by 3.6%, a rate not achieved by the country since 2014 when the price of oil plummeted suddenly and the Colombian peso lost around a third of its value over the subsequent 12 months.
Let’s break this down a little.
The 2018 first quarter GDP estimate will probably be affected by a statistical quirk. “And I don’t want to go beyond that because then it will be criticized if we don’t hit it”.
Consumer spending, accounting for more than two thirds of the economy, remained the major growth engine. Adding further, Dan said that once consumers’ willingness to spend increases the economy picks up. True, but if they spend it on imported goods, that actually detracts from GDP.
To get a better sense of underlying domestic demand, economists look at final sales to domestic purchasers, which strip out inventories and trade from GDP.
The results show strong improvement in various sectors of the economy including the success of the president’s move to cut taxes.
Steady economic growth has been complemented by major gains in the stock market swell as a robust labor market. “The TCJA is expected to provide a modest boost to the USA economy over the next few years”.
But it underperformed in the fourth quarter.
Mr Hammond tweeted this morning: “We can be proud of five years of sustained growth and record employment”.