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US GDP grows 2.6pc in Q4, slower than forecast

Published: January 27, 2018 13:21:29 | Updated: January 30, 2018 14:12:19


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The US gross domestic product (GDP) grew at a 2.6 per cent annual rate in the fourth quarter (Q4), compared to 3.2 per cent in the third quarter, the Commerce Department has said.

The economic growth of the world's largest economy unexpectedly slowed in the Q4 as the strongest pace of consumer spending in three years resulted in a surge in imports.

US government’s goal is for the economic growth of 3.0 per cent annually and the rolling party in December pushed through a $1.5 trillion package of tax cuts in an attempt to boost the growth.

The economy grew 2.3 per cent in 2017, an acceleration from the 1.5 per cent logged in 2016, according to Reuters.

Economists polled by Reuters had forecast the economy growing at a 3.0 per cent pace in the final three months of 2017.

They expect annual GDP growth will hit the government’s 3.0 per cent target this year, spurred in part by the tax cuts, a weak US dollar, rising oil prices and a strengthening global economy.

Growth, economists believe, will slow in 2019, with a recession likely in 2020, given low savings.

Consumer spending, which accounts for more than two-thirds of US economic activity, increased at a 3.8 per cent rate in the last quarter.

That was the quickest pace since the fourth quarter of 2014. It followed a 2.2 per cent rate of growth in the July-September quarter.

The surge, however, came at the expense of savings, which fell to $384.4 billion from $478.3 billion in the third quarter. The saving rate dropped to 2.6 per cent from 3.3 per cent in the prior period.

Robust consumer spending also limited the accumulation of inventories, which subtracted 0.67 percentage point from GDP growth after adding 0.79 percentage point in the prior period.

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