US Q4 GDP beats forecasts despite government shutdown
The US economic expansion ebbed at the tail-end of 2018, as the pace of inventory accumulation and spending by households and the federal government slowed while state and local governments retrenched, albeit by less than had been anticipated.
According to a first estimate by the Department of Commerce, the rate of growth in America's gross domestic product slowed from the annualised 3.6% clip observed over the third quarter to 2.6% for the three months to December.
Economists had forecast growth of 2.3%.
Business investment growth shot up by 6.2% thanks to bigger outlays on equipment and intellectual property, with the latter rocketing by 13.1%, and inventories added 0.1% to GDP growth, but residential investment fell.
On the back of recent data on firms' capital expenditures, outright declines in spending on equipment "are a decent bet for the front half of 2019."
So too, the pace of investment in IP was nearly double the underlying trend pace and "a much smaller gain" is likely in the first quarter, Ian Shepherdson at Pantheon Macroeconomics said.
The pace of household spending - which accounts for roughly 70% of economic activity - ebbed from 3.5% to 2.8%.
Export sales also slowed, even as imports jumped by 2.7%, such that net imports subtracted two tenths of a percentage point from the annualised pace of economic growth.
Federal government spending was up by 0.4%, despite a 5.6% drop in non-defence outlays.
Meanwhile, price pressures abated, with the GDP price deflator rising by 1.6% on the year following an advance of 1.8% over the three months to September.
The price deflator for personal consumption expenditures also slipped, from 1.6% to 1.5%, although at the so-called 'core' level it picked-up from 1.6% to 1.7%.
For all of 2018, GDP growth printed at 2.9%, versus growth of just 2.2% in the year before, while the price index for gross domestic purchases increased from 1.9% to 2.1%.
American's personal saving rate improved from 6.4% during the third quarter to 6.7% in the fourth, as disposable income growth accelerated from 4.2% to 5.7%.
The rise in real disposable incomes was even more marked, improving from 2.6% to 4.2%.
Commenting on the GDP data, Paul Ashworth, chief US economist at Capital Economics, pointed out that solid growth in real disposable personal incomes presaged another "strong" showing for consumption in the first quarter of 2019 and that the start of the partial federal government shutdown may have impacted on public spending.
"As the [fiscal] stimulus fades and the lagged impact of past monetary tightening continues to feed through, we expect GDP growth to slow to 2.2% this year and only 1.2% in 2020.
"Under those circumstances, we don’t expect the Fed to hike rates again and we anticipate 75bp of rate cuts in 2020."