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March 29, 2019

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US Q4 growth revised down, below target

The US economy slowed more than initially thought in the fourth quarter, keeping growth in 2018 below the Trump administration’s 3 percent annual target.

Corporate profits failed to rise for the first time in more than two years.

Gross domestic product increased at a 2.2 percent annualized rate, the Commerce Department said yesterday.

That was down from the 2.6 percent estimated in February.

The economy grew at 3.4 percent in the third quarter.

The revisions to the fourth-quarter GDP reading reflected markdowns to consumer and business spending, as well as government outlays and investment in home-building.

For all of 2018, the economy grew 2.9 percent as previously reported, despite the White House’s fiscal stimulus of US$1.5 trillion in tax cuts and more government spending.

Growth last year was the strongest since 2015 and was an acceleration from the 2.2 percent logged in 2017.

Compared with the fourth quarter of 2017, the economy expanded 3.0 percent, revised down from the 3.1 percent reported last month.

President Donald Trump has highlighted the year-on-year growth as proof that fiscal stimulus, which has contributed to a swelling of the federal government deficit, has put the economy on a sustainable path of strong growth.

Trump likes to showcase the economy as one of the biggest achievements of his term, declaring last July that his administration had “accomplished an economic turnaround of historic proportions.” On the campaign trail, Trump boasted he could boost annual GDP growth to 4 percent, a goal analysts always said was unrealistic given low productivity, among other factors.

There are signs the slowdown in growth persisted early in the first quarter, with retail sales rising modestly and manufacturing production and home-building tepid.

That was underscored by weak profits in the fourth quarter. After tax corporate profits were unchanged for the first time since the third quarter of 2016, after growing at 3.5 percent in the third quarter.

The economy is facing headwinds from the fading stimulus, slowing global growth, Washington’s trade war with China and uncertainty over Brexit.




 

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