US Economic Growth In 4Q Not As Bad As Expected

With the tax cut in the rear window, the growth in the U.S. economy slowed to an annual rate of 2.6 percent during the last three months of the year.

But despite the slowdown compared to the third quarter, results beat economists’ predictions, boding well for confidence. According to the TheStreet.com, economists were expecting the fourth-quarter gross domestic product (GDP) to grow 2.5 percent, slightly lower than the result. In the third quarter, the economy grew 3.4 percent.

The slowdown in growth was partly due to a lack of stimulus from President Donald Trump’s tax cuts at the end of 2017. Also hurting economic growth was a pullback in consumer spending due to concerns about a trade war with China and a government shutdown that was the longest in modern history.

The growth decline showed up in all aspects of the economy, including consumer spending, government spending and private investments. The declines were partially offset by an increase in exports and an acceleration in non-residential fixed investment, the Bureau of Economic Analysis said in a press release announcing fourth-quarter results. That news signals companies’ confidence in the economy, and is also seen as a key indicator of growth.

The results should be welcome news to Wall Street and investors. A debate has been raging about just how much the economy would contract in the fourth quarter. With concerns that the economy is heading toward a recession, the stock market has been on a roller coaster ride.

The Bureau of Economic Analysis warned in the press release that the results are not finalized, as pieces of data are still missing due to the government shutdown. The agency expects to provide an update on March 28, when it has the missing data. For all of 2018, the U.S. economy logged growth of 2.9 percent, slightly under the 3 percent the White House touted when rallying support for the $1.5 trillion tax cut in 2017.