The Bureau of Economic Analysis, BEA, finally released the fourth quarter growth rate estimate for 2018. The 4th quarter growth result at 2.6% exceeded expectations, and shows the U.S. economy is growing stronger than almost all economic forecasts.
WASHINGTON DC – In the fourth-quarter, U.S. gross domestic product grew at an annualized rate of 2.6%, according to the latest data from the Bureau of Economic Analysis.
Thursday’s report beat expectations, with consensus economists polled by Bloomberg looking for growth to slow to 2.2% during the final three months of the year. The domestic economy grew at a pace of 3.4% in the third quarter and 4.2% in the second quarter.
Despite the softening in GDP in the fourth quarter, overall growth in 2018 was solid. Real GDP grew at a pace of 3.1% in 2018, measured from the fourth quarter of 2017 to the final quarter of 2018. This represented a stronger pace of annual growth than the 3% targeted by the Trump administration. (read more)
The professional political class and corporate financial media are once again trying to talk down the strength of the U.S. economy. However, the Main Street economy is powering through despite their efforts.
There is a visible connection between the Wall Street multinationals and the financial media; both are riddled with anxiety over Trump’s economic policies that favor Main Street over Wall Street and it shows in the media coverage. I digress.
“Consumer spending continued to grow solidly and, most encouragingly, business investment growth recovered sharply after a dip in the third quarter. Despite big external headwinds and financial market volatility in the fourth quarter, U.S. firms are not retrenching sharply on capex. Labor market strength and ongoing fiscal stimulus should see domestic demand expanding by enough to keep GDP growth above potential in 2019, despite a rising drag from net trade.”
“Business investment was a big positive surprise, with nonresidential spending soaring 6.2% on the back of a 6.7% jump in equipment spending and a honking 13.1% increase in intellectual property products.”
The rate of import goods, a deduction from GDP, slowed down between the third and fourth quarter and consumer spending was higher than anticipated. That’s good news, but that’s not the whole story….. for Main Street it gets even better.
The current inflation rate (PCE index) was once again measured at 1.6%. However incomes are rising faster than inflation. This leads to more “disposable income”:
Disposable personal income increased $218.7 billion, or 5.7 percent, in the fourth quarter, compared with an increase of $160.9 billion, or 4.2 percent, in the third quarter. (TABLE 8)
BEA: During 2018 (measured from the fourth quarter of 2017 to the fourth quarter of 2018), real GDP increased 3.1 percent, compared with an increase of 2.5 percent during 2017.
The Full Picture: Business investment into Main Street USA continues to increase. Manufacturing jobs and durable good employment in Main Street continues to increase. Wages continue to rise. Inflation on most consumer goods remains low. Disposable income is growing, which means more consumer spending. More consumer spending means higher rates of economic growth and an expanding economy.
MAGAnomics is working.