Consumers, weak exports seen limiting fourth-quarter growth in US


By Lucia Mutikani

WASHINGTON (Reuters) – The US economy likely slowed in the fourth quarter, hurt by lower consumer spending and weak exports, which could leave 2018's growth near the Trump administration's 3 percent annual target.

The Commerce Department's Gross Domestic Product (GDP) report will be released on Thursday at 8:30 am and will provide the latest assessment of the impact of President Donald Trump's economic policies, including deregulation, tax cuts, government spending and tariffs. trade agreements.

Trump cited the economy as one of the greatest achievements of his presidency and declared last July that his administration "achieved an economic turnaround of historic proportions."

Gross domestic product probably rose at an annualized rate of 2.3% in the fourth quarter, according to a Reuters poll of economists after a 3.4% expansion from July to September. However, the survey was completed prior to the launch of December wholesale and retail stocks, as well as data on housing, factory orders and trade deficits, which have led many institutions to lower their forecasts.

The release of the fourth quarter GDP report was delayed by a partial 35-day government stoppage that ended Jan. 25, which affected the collection and processing of economic data.

The Federal Reserve of Atlanta is projecting that GDP grew 1.8% in the October-December quarter, which would be the slowest in almost two years. Economists are predicting that the economy grew by about 2.9% in 2018, which would be the best performance since 2015 and better than the 2.2% recorded in 2017.

"This is as good as the first Trump administration," said Joe Brusuelas, chief economist at RSM in New York.


The economy is slowing as the $ 1.5 trillion tax cut drive the Trump administration and more government spending fades. Growth is also being constrained by a trade war between the United States and China, which economists say is making businesses and households more cautious about spending.

"The tax cut did not change the game, it did not result in a permanent survey of the growth trajectory, only a temporary increase," said Brusuelas, who estimated that the effect of the tax cut peaked in October.

The slowdown will come as the economic outlook is also being clouded by signs of global demand cooling and uncertainty about Britain's exit from the European Union. These factors support the "patient" position of the Federal Reserve to raise interest rates later this year. Fed Chairman Jerome Powell reaffirmed the US central bank's position in his testimony before lawmakers on Tuesday and Wednesday.

Consumer spending growth, which accounts for more than two-thirds of US economic activity, is expected to have decelerated considerably from the robust 3.5% rate in the third quarter but still benefits from a strong labor market.

Trade tensions with China may limit the economy for a while. US Trade Representative Robert Lighthizer told lawmakers on Wednesday that Washington's issues with China are "too serious" to be resolved with Beijing's promises to buy more American goods and a threat of higher tariffs.

The trade dispute combined with a strong dollar and weaker global demand to reduce export growth. It also led cautious companies to accumulate imports, causing the trade deficit to widen.

The trade deficit is seen subtracting at least a half percentage point of GDP growth in the fourth quarter, after cutting two percentage points in the period from July to September.

With consumer spending slowing down, some of the imports probably ended up accumulating in deposits. This is expected to accelerate stockpiling, which could offset some of what would be anticipated in the GDP growth of the trade deficit.

But rising inventories would come at the expense of weak first-quarter growth, with most manufacturing measures weakening in January and February.

"Stocks could be more of a negative factor for future growth than we expected," said Daniel Silver, an economist at JPMorgan in New York.

Investment in inventories added 2.33 percentage points to GDP growth in the third quarter. Business spending on equipment should also remain subdued in the fourth quarter. It has slowed since the first quarter of 2018.

Residential construction was probably an obstacle to growth in the fourth quarter. Housing construction contracted since the first quarter, hampered by higher mortgage rates, land and labor shortages, and tariffs on imported timber.

(Reporting by Lucia Mutikani; Editing by Tomasz Janowski and Andrea Ricci)


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