The US economy slowed sharply in the final three months of last year largely due to falling exports, pulling the year’s growth to its lowest since 2011, the US Department of Commerce reported on Friday.
The first estimate of GDP in the October-December period showed growth fell to 1.9 percent, well below the 3.5 percent pace of the third quarter, and short of the consensus estimate by analysts of 2.2 percent.
For the full year, the economy expanded 1.6 percent, a full point below the pace of 2015.
Photograph: Bloomberg
“The deceleration of real GDP in the fourth quarter reflected a downturn in exports, an acceleration in imports ... and a downturn in federal government spending,” the report said.
Exports fell 4.3 percent in the latest quarter, while imports rose 8 percent. Together those two factors subtracted 1.7 points from GDP in the quarter. Federal spending fell 1.2 percent.
That picture of growing imports and falling exports is likely to play into the hands of US President Donald Trump, who has railed against the US trade deficit.
However, analysts note that the decline can be attributed in large part to the slowdown in soybean exports after a big increase in the third quarter.
“The good news was that both business investment spending and housing investment are showing signs of life, IHS Markit chief economist Nariman Behravesh said in a research note. “Along with continued solid spending by consumers at the end of the year and the recent surge in business and consumer confidence, this means that the US economy will keep growing at a decent clip in the coming quarters.”
The tepid growth for the fourth quarter would seem to confirm the expectation that the US Federal Reserve will hold off on another interest rate increase, when central bankers meet next week, after they raised the benchmark rate last month for only the second time in a decade.
However, the Fed’s preferred inflation measure, the Personal Consumption Expenditures (PCE) price index, jumped to 2.2 percent in the final quarter, from 1.5 percent in the third quarter, which is above the Fed’s 2 percent target and the highest since early 2012.
Excluding food and energy prices, the core PCE price index slowed to 1.3 percent from 1.7 percent in the third quarter. For the full year, the price index increased 1.1 percent compared with 2015, while the core was up 1.7 percent, the fastest since 2012.
Personal consumption also helped underpin growth, with a 2.5 percent increase in the fourth quarter, but that still was slower than the previous two quarters.
The economy was also buoyed by an 11 percent surge in spending on durable goods and a 10 percent jump in residential investment.
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