US economy: Visible deceleration in foreign trade, but investment saves quarterly result

In the fourth quarter, economic growth in the United States decelerated visibly in comparison to the previous quarter. In the third quarter 2016, strong growth of an annualised 3.5 percent was recorded compared with growth for the final quarter of only 1.9 percent. Foreign trade also deteriorated, with declining exports opposite a marked increase in imports. This effect weighed on growth by no less than 1.7 percentage points and is hardly likely to be welcome by the new US president. It should be noted here though that soybean exports received a strong boost in the third quarter as a result of crop failures outside the United States. As usual, private consumption acted as the ultimate guarantor of growth with a positive contribution of 1.7 percentage points. However, this contribution was not as strong as in the two preceding quarters.

Investment stepped into the breach, as it were. With a positive contribution also of 1.7 percentage points, the US economy was essentially prevented from grinding to a halt. The marginal increase in public investment would by no means have been sufficient to prevent this. The visible increase in investment is to be viewed in all the more positive a light as investment in plant and equipment supported growth for the first time in four quarters. House building also provided a similarly strong impetus following surprising weakness in the two preceding quarters.

All in all, the growth rate for the final quarter, which doesn’t even have a two in front of the decimal point, provides a far better reflection of the past year than the strong third quarter. After all, given the very weak first half-year, the figures published today put US economic growth at a weak 1.6 percent. This is the weakest growth in five years.

So where will things go from here? Will the US economy, which accounts for no less than one fifth of global economic output, this year again deliver growth rates that are more normally associated with ‚Old Europe‘? In our assessment, the positive sentiment among consumers and in the economy points against this prospect. What is more, the healthy labour market and the still very low interest rates should ensure that economic growth as a whole again exceeds two percent this year. But this still puts our estimate a long way off from the strong growth of some four percent promised by Donald Trump. The economy is likely to benefit from the announced spending programmes and tax reductions in the second half-year at the earliest. In this environment, the Federal Reserve is likely to stick to its very prudent policy this year too and to continue to support growth.


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