Fourth Quarter GDP Growth Revised Lower

In spite of the $1.5 trillion tax cuts put into place at the end of 2017 by President Donald Trump, the economy slowed more than anticipated at the end of 2018.

According to a report in TheStreet.com, citing the Commerce Department’s Bureau of Economic Analysis, gross domestic product grew at a seasonally adjusted 2.2 percent pace during the fourth quarter as compared with the third quarter. That was below the 2.6 percent increase initially reported and under the 3.4 percent rate of growth seen in the third quarter.

For all of 2019, economists polled by FactSet expect growth to be 2.4 percent, which would be lower than the 2.9 percent total growth for 2018, noted the report.

In a statement, the Bureau of Economic Analysis said, “The deceleration in real GDP growth in the fourth quarter reflected decelerations in private inventory investment, PCE and federal government spending, and a downturn in state and local government spending. These movements were partly offset by an upturn in exports and an acceleration in non-residential fixed investment. Imports increased less in the fourth quarter than in the third quarter.”

TheStreet.com noted that in the second quarter of last year, GDP growth jumped 4.2 percent as the tax cuts were put in place. Economists told the news outlet that many companies used the tax breaks to increase dividends to shareholders or to repurchase shares, enabling companies to see a short-term increase in earnings. The tax break did not go toward factories, technology or equipment.

Ian Shepherdson, the chief economist at Pantheon Macroeconomics, told TheStreet.com that the slowdown in GDP growth shows the benefits from the tax cuts have ended and weren’t going to last long in the first place. The output for the fourth quarter was also reduced to 3 percent from 3.1 percent. The report did note that the federal government had said it would reach 3 percent annual growth for 2018.