US Q4 Growth Slows But Remains Above Projections

The partial shutdown of the US Federal Government because of wrangles over the budget and the funding of President Trump’s controversial border wall meant that the release of the Q4 growth figure for 2018 has been delayed beyond its normal release date.

The 2018 Q4 data, always given on an annualised basis, shows that the US economy expanded at a rate of 2.6%. The figure beat projections which predicted that growth would come in at 2.4%, however, it was sharply down on the Q3 figure of 3.4% which itself came in lower than the Q2 figure of 4.2%, suggesting that the US economy is slowing.

Full year GDP for 2018 came in at 2.9% which was marginally below Trump’s target of 3%. On the face of it, the figure compares well with the 2017 full year growth figure of 2.2%, but 2018 saw major cuts to taxes in the USA which ought to have boosted growth, but can’t be repeated going forward.

The Q4 data was buoyed by a positive contribution from non-residential fixed investment, personal consumption expenditure, exports, private inventory expenditure and Federal Government spending. On the other hand, residential fixed investment, state and local government expenditure and imports were a drag on growth.

The long-term (annualised) growth in the USA stands at 3.22%, for data from 1947 to 2018. The fastest growth seen was 16.7% in Q1 1950 and the deepest contraction came in at -10% in Q1 1958.

The President remains Bullish about US growth prospects claiming that growth of 4% is possible whilst targeting 3%. Most analysts believe that this is unduly optimistic and suggest that growth gong forward is likely to be in the range between 1.7 and 2.2%.

Domestic consumption accounts for approximately 70% of US output. Data suggest that consumer demand, whilst increasing at 2.8% in Q4 is also slowing, dipping from a Q3 value of 3.5%.

Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.