Spending softens US slowdown, growth just shy of Trump target 
2019-03-01
The US economy slowed less than expected in the fourth quarter amid solid consumer and business spending, leaving 2018 growth just shy of the Trump administration’s 3 percent annual target.
The Commerce Department’s GDP  report yesterday offered the latest assessment of the impact of President Donald Trump’s economic policies, including deregulation, tax cuts, increased government spending and tariffs aimed at securing more favorable trade deals.
Trump has touted the economy as one of the biggest achievements of his presidency and declared last July that his administration had “accomplished an economic turnaround of historic proportions.”
GDP increased at a 2.6 percent annualized rate in the fourth quarter after expanding 3.4 percent in the July-September period. The economy grew 2.9 percent in 2018, powered by the White House’s US$1.5 trillion tax cut and increased government spending.
It was the best performance since 2015 and better than the 2.2 percent logged in 2017.
Economists had forecast GDP rising 2.3 percent in the fourth quarter.
Despite the economy’s strong performance in the last quarter and in 2018, there are indications activity is softening, with most manufacturing measures weakening in January and February.
The labor market is also showing signs of cooling.
A report from the Labor Department yesterday showed the number of Americans drawing unemployment benefits rose to a 10-month high in the week ended February 16.
The economy is slowing as the boost from fiscal stimulus fades. Growth is also being restrained by trade tensions between the United States and China.
The slowdown comes at a time when the economy’s outlook is also being clouded by signs of weakening global demand and uncertainty over Britain’s departure from the European Union — which takes effect on March 29.
These factors support the Federal Reserve’s “patient” stance toward raising interest rates further this year.
Fed Chairman Jerome Powell reaffirmed the US central bank’s position in his testimonies before lawmakers on Tuesday and Wednesday.
The dollar trimmed losses against a basket of currencies on the GDP data, while US Treasury yields rose. US stock index futures slightly pared losses.
The fourth-quarter GDP report was delayed by a 35-day partial shutdown of the government that ended on January 25, which affected the collection and processing of economic data.
The Commerce Department said while it could not quantify the full effects of the shutdown, it estimated the partial closure had subtracted about one-tenth of a percentage point from fourth-quarter GDP growth through “a reduction in the labor services supplied by federal employees and reduction in intermediate purchases of goods and services by non-defense agencies.”
Growth in consumer spending, which accounts for more than two-thirds of US economic activity, increased a still strong 2.8 percent in the fourth quarter.
Consumer spending grew a robust 3.5 percent in the third quarter.
Trade tensions with China could constrain the economy for a while.
