Sun, Jan 28, 2018 - Page 16 News List

US economy cools in Q4, falling below Trump goal

AFP, WASHINGTON

The world’s largest economy slowed in the final quarter of last year, bringing US GDP expansion for the year below US President Donald Trump’s ambitious 3 percent target, according to data released on Friday.

The slowdown underscored the difficulty the administration faces in making good on an emblematic pledge.

The White House believes the massive tax cuts passed last month would energize the economy and offset the US$1.5 trillion cost of the tax overhaul, but economists say this is not likely and any growth bump would be modest.

After two quarters of expansion above 3 percent, GDP slowed to 2.6 percent in the October-to-December period, held down by a big jump in imports and falling business inventories, according to the US Department of Commerce’s first growth estimate.

That was slower than analysts forecast and meant growth for the year was 2.3 percent, better than the 1.5 percent gain in 2016, but well below 2015’s 2.9 percent.

However, the result is subject to revision as more data become available.

Analysts highlighted the positive signs within the report, including strong spending and investment, but cautioned that growth in the first quarter of this year could be below the trend, as in recent years.

“In short, growth was a bit less than generally expected, disappointing hopes for a third consecutive 3 percent-or-better quarter for the first time since 2005, but the details were stronger than the headline figure,” Jim O’Sullivan of High Frequency Economics said in a research note.

The GDP data showed growth in the fourth quarter was bolstered by consumer spending, home buying and business investments.

Exports also had a good quarter as the US dollar continued to weaken, gaining 12.6 percent compared to the previous quarter, the largest jump in four years.

However, imports, which subtract from GDP, rose an even faster 13.9 percent, the largest quarterly increase in more than seven years.

Durable goods orders were another bright spot for the quarter, with sales of large, factory-made items rising by 8.2 percent, the biggest quarterly gain in 14 years.

“Given the strongest business confidence in decades and expectations of still stronger tax-cut fueled growth to come, companies are almost certain to kick production up a notch in 2018,” Chris Low of FTN Financial said in a client note.

On Wall Street, investors shrugged off the somewhat disappointing GDP and all three major indices surging to record closes, pushed by solid corporate earnings reports.

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