Fourth-Quarter U.S. GDP Growth – At A Glance

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Steady Trend

The fourth quarter’s 2.6% growth reading came after growth rates of 3.2% in the third quarter and 3.1% in the second quarter, extending a stretch of growth above the expansion’s lackluster average close to 2%. Looking through short-term volatility, GDP expanded 2.5% in the fourth quarter compared with a year earlier, making 2017 the strongest calendar year for economic growth since 2014, when GDP was up 2.7%.

Confident Consumers

Consumer spending, which accounts for more than two-thirds of total U.S. economic output, picked up momentum in the final months of 2017. Personal consumption expenditures rose at a 3.8% annual rate in the fourth quarter, up from 2.2% growth in the third quarter. Spending on goods was the strongest in more than a decade. Consumer confidence has been high in recent months, bolstered by low unemployment and a record-setting stock market.

Businesses Invest More

A broad measure of U.S. business investment also picked up steam in the fourth quarter, capping a solid 2017 for capital expenditures. Fixed nonresidential investment rose at a 6.8% annual rate after posting 4.7% growth in the third quarter. Spending on equipment saw double-digit growth for the second straight quarter, rising at an 11.4% annual rate, and investment rose more modestly in structures and intellectual property products such as software and research and development.

Trade Headwinds

A wider foreign-trade deficit weighed on growth during the final months of 2017. Friday’s report showed exports rose at a 6.9% pace in the fourth quarter, while imports surged at a 13.9% rate—the most since the third quarter of 2010. On the whole, net exports subtracted 1.13 percentage points from the overall 2.6% GDP growth rate.

Balancing the Scales

Two volatile categories, net exports and private inventories, both subtracted from growth in the fourth quarter after making positive contributions in the prior few periods. But on top of the healthy gains in consumer spending and business investment, growth was supported in the final three months of 2017 by the housing market and government expenditures.

Better Weather

A series of strong late-summer storms disrupted economic activity in Texas, Florida and elsewhere. But the Commerce Department said last year it wasn’t possible to estimate the precise impact of Hurricanes Harvey and Irma on GDP for the third quarter. (Puerto Rico and the U.S. Virgin Islands sustained heavy damage but those territories aren’t included in GDP or most other national economic figures.) The recovery from those storms may have affected fourth-quarter GDP as well, though Friday’s report didn’t give any specifics.

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