By Yingcong (June) FU
The U.S. Gross Domestic Product grew at an estimated seasonally-adjusted annual rate of 1.9 percent in the fourth quarter, up 1 percentage point from the year-ago period, but slower than the upwardly-revised 3.5 percent annual growth rate in the third quarter, according to the U.S. Bureau of Economic Analysis on Friday.
Economists’ consensus estimate was 2.2 percent.
Annual GDP growth totaled 1.6 percent, the lowest since 2011.
Fourth-quarter growth was slowed by a wider trade deficit, including a 4.3 percent decline in exports and an 8.3 percent increase in imports. Part of the reason was slow economic growth abroad and a strengthening dollar that makes foreign goods cheaper and domestic goods more expensive, said Andrew Opdyke, economic research assistant at First Trust Portfolios LP in Chicago.
It was due to the large deficit on huge declines in commodities and soybean exports, which had grown unusually, by 10 percent, in the third quarter, said Robert Johnson, an economist at Morningstar in Chicago, in a video.
Private investment contributed a seasonally-adjusted annual growth rate of 10.7 percent, showing confidence from consumers and businesses, Opdyke said. Another significant boost occurred in equipment and residential investment, which increased at rates of 10.2 percent and 3.1 percent respectively. Homebuilding, which totaled around 1.2 million units in 2016, is expected to rise to 1.5 million in 2017, given population growth and natural aging of housing, Opdyke added.
Government spending growth stayed steady at a rate of 1.2 percent. Consumer spending, higher by a rate of 2.5 percent, was slightly lower than in the third quarter. But it is in line with the 2.7 percent annual rate over the past two years and the rate since the recession ended in mid-2009, Opdyke said.
This was the last report under the Obama administration. “Looking forward, we expect growth to pick up if the Trump administration makes good on pledges to cut tax rates, cut government spending, and ease regulations, particularly on energy infrastructure,” Opdyke said, projecting a 2017 annual GDP growth of 2.6 percent.
But Johnson expects the slowdown to continue, because of a shortage of labor force replacements for retiring baby boomers. “If you don’t grow the workforce, it’s very hard to grow the economy. I think that’s going to put a terrible headwind on the economy,” Johnson said in the video.
Nominal GDP growth excluding inflation was 4.0 percent, or $185.5 billion, in the fourth quarter. It grew 2.9 percent in 2016, contributing to the total U.S. GDP of $18.86 trillion.