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US economic growth continues to slow | US economic growth continues to slow |
(about 1 hour later) | |
US economic growth slowed to an annualised rate of 2.6% in the final three months of 2018, figures show. | US economic growth slowed to an annualised rate of 2.6% in the final three months of 2018, figures show. |
However, the reading was ahead of expectations for a rate of between 1.8% and 2%. | However, the reading was ahead of expectations for a rate of between 1.8% and 2%. |
The pace of growth was below the 3.4% rate seen in the third quarter thanks to a slowdown in consumer spending. | The pace of growth was below the 3.4% rate seen in the third quarter thanks to a slowdown in consumer spending. |
The growth figures had originally been due to be released in January, but were delayed because of the 35-day US government shutdown. | The growth figures had originally been due to be released in January, but were delayed because of the 35-day US government shutdown. |
The US economy was boosted last year by a big tax cut and an increase in government spending. | |
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said that the fourth quarter was "not a bad performance" given that the economic boost from the Trump administration's tax cuts is now fading. | Ian Shepherdson, chief economist at Pantheon Macroeconomics, said that the fourth quarter was "not a bad performance" given that the economic boost from the Trump administration's tax cuts is now fading. |
For the full year, GDP grew by 2.9% - just shy of President Donald Trump's 3% target - compared with 2.2% in 2017. | For the full year, GDP grew by 2.9% - just shy of President Donald Trump's 3% target - compared with 2.2% in 2017. |
Mr Shepherdson said he expected that growth in 2019 would revert to the "post-crash trend" of between 2% and 2.5%, "demonstrating that the personal tax cuts offered nothing more than a sugar high, and that the business tax cuts did nothing to lift trend growth. Though they did make shareholders richer". | |
Capital Economics chief US economist Paul Ashworth said he expected growth of 2.2% this year and 1.2% in 2020. | Capital Economics chief US economist Paul Ashworth said he expected growth of 2.2% this year and 1.2% in 2020. |
Analysis: | |
By Andrew Walker, BBC World Service economics correspondent | |
It has certainly been a significant slowdown. But that figure of 2.6% is still reasonably strong. It is actually more than most independent economists think the US can sustain over the long term. Many think there was a short-term boost from President Trump's tax cuts which is now fading. | |
In the coming years, the economy will face further headwinds from an ageing population. The view that long-term prospects are rather more modest is shared by policymakers at the Federal Reserve. They consider the long-run growth of the US economy is likely to be somewhere between 1.7% a year and 2.2%. | |
President Trump by contrast has suggested that 4% is doable, and his administration is aiming for 3%. Growth for the full year 2018 was very close to the latter figure. But sustaining it will be a serious challenge. | |
Consumer slowdown | |
Consumer spending, which accounts for more than two-thirds of US economic activity, increased at an annual rate of 2.8% in the final three months of last year. | |
That was a slowdown from the 3.5% rate set in the previous quarter. | |
Recent figures showed that retail sales fell by 1.2% in December while demand for new vehicles dropped by 1% in January compared to the same month last year, with car sales particularly hard hit with a 4% drop. | |
Mr Ashworth said that both factors mean that "consumption growth could fall below 2%" in the first quarter of 2019. | |
Also, while business investment growth reached 6.2%, he said "the first quarter won't be this good". | |
"We already know that lower oil prices will depress mining investment, while the weakness of underlying durable goods orders points to a softer equipment showing." |