MW: Fourth-quarter GDP left at 1.9% despite bigger pop in consumer spending
WASHINGTON (MarketWatch) â€” The growth in the U.S. economy in the final quarter of Barack Obamaâ€™s presidency was left at 1.9%, held down by a bigger trade deficit even as consumer spending rebounded strongly.
The governmentâ€™s second look at gross domestic product in the fourth quarter showed a bigger increase in purchases by consumers than initially reported: 3% vs. 2.5%. What Americans spend has the biggest influence by far on GDP, the official scorecard for the U.S. economy.
Yet the increase in what consumers spent was offset by somewhat smaller gains in business investment and local and state spending, revised government figures reveal. As a result, GDP was unchanged from the original estimate.
Although GDP is a backward-looking number, the resilience of consumers should bode well for the economy in the months ahead. Household spending accounts for as much as 70% of U.S. economic activity.
Americans are able to spend more because of steady growth in an economy whose current expansion is nearing its eighth birthday. Millions of jobs have been created since 2010, pushing the unemployment rate below 5% and causing wages to rise a bit faster as the labor market tightens.
Whatâ€™s more, a variety of surveys suggest consumers are the most optimistic in years, with Republicans and independents especially hopeful that the Trump White House will further speed up the economy.
President Trump has promised to cut taxes and reduce regulations in an effort to accelerate growth in an economy that has gone a record 11 years without reaching 3% annual GDP. The U.S. expanded just 1.6% in 2016.