5 Things to Watch in Fourth-Quarter U.S. Growth

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The U.S. government on Friday releases its first estimate of gross domestic product in the fourth quarter of 2017, offering a broad look at the nation’s economic health. Economists polled by The Wall Street Journal estimate output rose at a 2.9% annual rate from October through December, which would mark another solid showing.

#1: Maintaining Momentum

U.S. output is expected to clock in at or near 3%, which would be a strong finish to the eighth full calendar year of the economic expansion. Output rose at a 3.2% rate in the third quarter and a 3.1% pace in the second. The economy hasn’t posted three consecutive quarters of at least 3% growth since the nine-month period ending in early 2005, during the thick of the last housing boom. Even if it doesn’t hit that milestone, the economy appears to have posted its best nine-month stretch of growth since 2014.

#2: Shy of Trump’s Annual Target?

So has President Donald Trump met his goal of a 3% economy? Not so fast. The economy has experienced bursts of economic growth throughout the current expansion only to revert to a subpar 2% trend. Growth for all of 2017 appears to have easily exceeded 2% but remained below 3%. GDP grew 1.8% in 2016, 2% in 2015 and 2.7% in 2014.

#3: Consumers Lead Growth

The big driver of economic growth in the quarter appears to be consumer spending. Deutsche Bank estimates Americans boosted spending at a 3.6% pace, which would be the most since 2015. One factor is likely the temporary effects of late-summer hurricanes: Consumers who held off purchases during the storms made them up at year’s end. But there are broader factors, too: Rising household wealth, low unemployment, modest inflation, high confidence.

REUTERS

#4: Bullish Businesses

Perhaps the biggest story line of 2017 was a pickup in investment spending by U.S. businesses.  Companies that resisted shelling out for long-term projects–warehouse expansions, new equipment, software–in recent years appeared to loosen up last year. Rising oil prices have also spurred energy companies to renew spending. Some economists estimate business spending on equipment grew more than 8% last year, which would be the biggest 12-month increase since mid-2014.

#5: Widening Trade Gap

The trade gap appears to have expanded in the fourth quarter, as American households and companies increased spending on foreign goods. It’s true the strengthening global economy has lifted demand for American exports, which rose 2.2% in the third quarter compared with a year earlier. But imports rose by an even greater amount, and that trend likely continued in the fourth quarter.

Bloomberg

from Real Time Economics http://ift.tt/2DCLDhL