USA: the economy grew at a rate of 2,6% in the fourth quarter

The U.S. economy grew at a solid 2,6% rate in the final three months of last year, helped by consumer spending since the spring of 2016 and a strong rebound in housing construction.

According to reports from the Commerce Department, fourth quarter advancement in gross domestic product, the country's total production of goods and services, followed gains of just over 3% in the second and third quarters.

The slowdown in the period from October to December reflects a worsening of the trade deficit and a lower growth in the restocking of inventories by companies. Throughout 2017, the economy grew by 2,3%. This is a significant improvement from a 1,5% increase in 2016, but little different from the modest average growth rate of 2,2% after the end of the Great Recession.

Economists, spurred on by Trump's $ 1,5 billion tax cut, are looking for even better growth this year. The Trump administration claims that the economic agenda of tax cuts, deregulation and stricter enforcement of trade laws will boost economic growth at a sustained rate of 3% or even better in the coming years. In the 8 and a half years of the current recovery, the growth rate has been 2,2%, the weakest increase since the end of World War II.

Trump said his tax plan will act as "rocket fuel" for the economy, prompting Americans to spend more and companies to increase investment. Economists, however, believe that the expansion of growth will be short-lived. They are predicting that GDP this year will have increased by about 0,4% from the tax cut and by about 0,2% in 2019. Beyond that, many analysts believe that rising interest rates will reduce growth to about 2,2%.

Mark Zandi, chief economist at Moody's Analytics said, “Deficit-funded tax cuts will provide some short-term substance for the economy, but will prove temporary as we are already in full employment and the Federal Reserve will respond. by aggressively raising interest rates ”.

Michael Pearce, a US economist at Capital Economics, expects solid growth to continue in the coming quarters. The economist said the sharp rise in imports that caused the trade deficit to widen reflects a recovery from hurricane-induced port disruptions in the third quarter. "The US economy got a lot of momentum even before the tax cuts went into effect this year," Pearce said.

Treasury Secretary Steven Mnuchin, interviewed on CNBC, described the modest slowdown in the fourth quarter as a short-term anomaly. "I think people now expect it to get to 3% of GDP," he said. Fourth-quarter growth was spurred by a 3,8% increase in consumer spending, representing 70% of economic activity. This was up from a 2,2% increase in the third quarter and was the fastest quarterly advance since spring 2016.

Business investment in new plant and equipment was also strong, up 6,8% in the fourth quarter. Spending on home construction increased 11,6% after two quarters of decline. Areas of strength were slightly offset by a sharp increase in the country's trade deficit, which subtracted 1,1% from growth, and a slowdown in corporate spending on inventory reinvestment, which reduced growth by 0,7% .

 

USA: the economy grew at a rate of 2,6% in the fourth quarter

| Economy, PRP Channel |