U.S. Gross Domestic Product

Fourth Quarter U.S. GDP Disappoints at 2.6%

Image Group
Shutterstock
Exports increased 6.9 percent, but were offset by a 13.9 percent increase in imports even as the dollar weakens. Above, the port of LA.

U.S. economy sputters in the final quarter of 2017 even as business investment and exports rise.  Consumer spending still leads the way.

U.S. gross domestic product (GDP) increased at an annual rate of just 2.6 percent in the fourth quarter of 2017, according to the advance estimate released by the U.S. Commerce Department earlier today, well below the 3% to 4% figures that were forecast in many outlets and a 19 percent drop from the third quarter figure of 3.2 percent. The New York Fed had forecast 3.9% growth.

That means annual GDP, the total value of all goods and services produced, for 2017 will now come in at 2.53 percent, based on the average of all four quarters, an improvement over the paltry 1.85 percent annual average for 2016, but well below the 3.0 percent average that many analysts had predicted.

It's a disappointment for the Trump Administration as they were hoping to cap off their first year by hitting the magic 3.0 percent growth mark something the Obama Administration failed to do in eight years.  The lower than expected Q4 figure only reinforces the work that is still left to be done to get the U.S. economy back on track from eight years of increased regulations, government spending and unprecendented easy money policies from the Federal Reserve.

Once again, the problem was the investment, or supply-side, of the economy, which increased 3.6 percent in the fourth quarter but fell 51 percent from the 7.3 percent third quarter figure.  Business inventory was the main reason as it deducted 0.67 percent from the overall GDP figure.

Consumer spending increased 3.8 percent from the pervious quarter, the highest rate since the second quarter of 2016.  Overall, consumer spending represented almost the entire amount of 2.6 percent growth.

Exports were up 6.9 percent in the fourth quarter, almost triple the third quarter rate, as the U.S. dollar continues to weaken, but it was offset by a huge 13.9 percent increase in imports.  The U.S. trade deficit, already at record levels, just grew larger and is rapidly approaching $800 billion.