Q4 GDP = +2.6%

This morning, the government reported that the U.S. economy grew, in real annualized terms, by 2.6% in the fourth quarter of 2017. That’s below expectations of 2.9%. I thought there was a good chance the number would fall between 3.5% and 4%.

Despite the miss, some of the details look pretty good.

For now, consumers are driving the growth. Consumer spending rose at a 3.8% in the period, an increase last exceeded in late 2014. Spending on long-lasting items known as durable goods rose at the fastest rate since 2009. That likely reflects, in part, Americans buying new cars and other goods to replace items damaged in the storms.

Meanwhile, a key category of business spending also broke out. Nonresidential fixed investment—reflecting spending on commercial construction, equipment and software—climbed at a 6.8% rate. For the year, such investment rose by a similar margin, posting the best 12-month gain in three years.

For the year, the economy grew by 2.5% which is pretty mediocre but it’s up from 2015 and 2016. The year-over-year GDP growth rate has now improved for six straight quarters.

Posted by on January 26th, 2018 at 8:41 am

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