US: Q4 economic growth not only inhibited by foreign trade, but the growth path is maintained

An initial estimate shows that the US economy in the fourth quarter grew at an annualised rate of 2.6 per cent. This represents a slight slowdown on the previous two relatively strong quarters, both of which recorded rates above the three per cent mark. As we see it, however, the latest figures do not call into question the ongoing growth trend in the world’s largest industrial nation. On the one hand, the positive trend barometers point towards an economy that continues to run smoothly. On the other, two special effects have depressed the reported growth in gross domestic product (GDP). Historically strong demand for imports in particular curbed the pace of growth. A second factor was the rebound in inventory levels.

The double-digit increase in exports shows that the US economy has benefited from the global economy. However, because imports that have always been significantly higher in absolute terms, came in even stronger, foreign trade led to a 1.1 percentage point decline in economic growth. The decrease in inventory levels, which were well filled in the third quarter, curbed GDP growth by a further 0.7 percentage points.

Private consumption, which contributed an impressive 2.6 percentage points to growth, not only provided the strongest stimulus of all GDP components but also the strongest boost since February 2016. Investment in homebuilding recovered again sharply for the first time after two successive declines. With the sharp rise in investments in machinery and equipment shifting up another gear, private investments also generated a pleasing highly positive impetus totalling 1.3‑percentage points.

However, one should not lose sight of the fact that the public sector dressed up the overall economic balance somewhat for the fourth quarter. The 0.5 percentage point increase is the highest since the second quarter of 2015, supported at federal level by a sharp rise in defence expenditure. Investment also increased visibly at subordinate public levels.

Our growth forecast for this year is unchanged at 2.5 per cent, after 2.3 per cent the year before. The acceleration in economic growth is likely to be boosted above all by another slight rise in investment activity. Private consumption will continue to be supported by the ongoing payroll growth. Given the most recent dampening of consumer confidence, even if it is still at a very high level, and the as yet subdued wage increases, we do not expect a marked growth in consumption above that of the previous two years.

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