GDP growth is flagging

by Wade Massey March 31, 2017, 0:50
GDP growth is flagging

Gross domestic product increased at a 2.1 percent annualized rate instead of the previously reported 1.9 percent pace, the Commerce Department said on Thursday in its third GDP estimate for the period.

But business investment increased 0.9%, below the previous 1.3% estimate. Consumer spending offset the drag the trade deficit has been on overall GDP.

The small change to the fourth quarter did not alter growth for the entire year, which came in at an anemic 1.6 per cent.

The US economy grew 1.6 percent in 2016 from the previous years, according to the Commerce Department, which tracks GDP. Get twice-daily updates on what the St. Louis business community is talking about. As a result, the economy grew at only a 1.0 percent rate when measured from the income side, braking sharply from the 5.0 percent pace of growth in the third quarter.

Obama's best year, as far as growing the economy, was 2015 when it grew 2.6 percent from 2014 - after growing 2.4 percent that year from 2013. The Trump administration has offered few details on its economic policies.

Falling exports and declining spending by the federal government nevertheless put fourth quarter growth well below the July-September period, which saw brisk expansion of 3.5 percent.

While the United States has seen a steady recovery since the "great recession" of 2008, it has also been among the slowest compared to previous post-crisis periods, as an aging labour force and higher savings rates have dampened growth.

Treasury Secretary Steven Mnuchin said last week that even if the initial goal of getting the tax measure approved by August slips, he still believes the plan can win congressional approval by this fall.

Mnuchin has cited a lower goal of growth above 3 per cent. Top forecasters with the National Association for Business Economists on Monday projected GDP growth this year of 2.3 percent, rising only slightly to 2.5 percent in 2018. The Fed is raising interest rates to make sure that inflation does not become a problem but higher rates could make it harder to achieve faster GDP growth.

"Altogether, the third estimate of Q4 GDP paints a picture of a healthy consumer, likely fueled by ongoing gains in employment, modest increases in wages, and solid balance sheets". It will issue its first look at first quarter GDP on April 28.

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