Comment on U.S. GDP Last Quarter

January 30, 2020

The first estimate of U.S. real GDP growth in the final quarter of 2019 of 2.1% annualized compared to the third-quarter level matches quarterly growth last summer and marks the third straight quarter with growth at or very close to 2.0%. Fourth quarter-over-4Q growth was 2.3%. Calendar 2019 average growth equaled 2.3% as well, lowest since 1916 and the second weakest result since 2013. The late-2017 massive tax cut has proven to be a real bust from the standpoint of securing enduring business investment has had been promised at the time. Non-residential investment (-1.5% versus 3Q) was down for a third straight quarter and produced the first on-year drop (-0.1%) in that critical component of aggregate demand since the initial quarter of 2016. Net exports contributed 1.5 percentage points out of the 2.1% GDP growth rate last quarter. However, that support resulted not from stronger exports, which were just 0.2% higher than a year earlier, but from declining imports, which plunged at an 8.7% annualized rate versus 3Q and fell 2.2% below the level in the final quarter of 2018. Government spending (up 2.7% versus 3Q and by 3.0% on year) boosted last quarter’s growth rate by half a percentage point, continuing its rapidly accelerating acceleration under Republican control of both the executive and legislative branches of U.S. government. It’s notable, too, that the price deflator for personal consumption went up only 1.2% on year overall last quarter and by 1.6% among core items. Both figures were smaller than year-on-year comparisons of inflation in the third quarter as well as in the final quarters of 2018, 2017, or 2016.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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