The world’s largest economy grew by 0.8% in the final three months of 2013, giving an annualised growth figure of 3.2%, according to the first estimate produced by the US Department of Commerce. As with all such figures, it is subject to revisions as more data becomes available and will be updated three times.
The actual full year GDP picture will be more modest and initial projections put it at 1.9%. This compares poorly with the comparable figure from 2012 which came in at 2.8%, reflecting the lacklustre nature of the economy after the Global Financial Crisis and the influence of generally weak demand in other major economies.
The Q4 figure will have been harmed by the partial shutdown of the federal government in October when Republicans refused to agree to a fresh budget without scrapping the Democrats’ flagship healthcare programme. It saw several hundred thousand federal workers “furloughed” and had a knock-on effect on the wider economy. Whilst the budget crisis has been resolved, a potentially catastrophic wrangle over raising the US debt ceiling is still festering and must be resolved in February – partisan goodwill permitting. Failure to agree over spending cuts at this time last year, led to the Sequester which was an automatic series of cuts forced on the administration. Again, this will have had a detrimental effect on the overall growth figure for 2013.
As we noted in yesterday’s piece, the gradual withdrawal of the US asset purchase programme is proceeding with a further reduction of $10 billion per month going forward from February. Despite disappointing job figures for December and less than stellar growth in 2013, it is likely that the Taper will continue across 2014, but clearly, the Federal Reserve will monitor its effect on both the US economy and economies further afield as it proceeds.