U.S. growth predicted to throttle back

Analysts say likely to slow from 2.6% pace

WASHINGTON• The U.S. economy turned in a solid performance in 2018, boosted in part by tax cuts and higher government spending. But growth slowed by year’s end, and most economists envision a weaker outlook for the coming months and probably years.

GDP, the broadest gauge of economic health, expanded at a 2.6-per-cent annual rate in the OctoberDecember period, the government said Thursday. That was down from a 3.4-percent rate in the July-september period and a sizzling 4.2-per-cent pace from April through June. During those months, the economy benefited from tax cuts and from higher government spending, the gains from which are thought to be fading.

For 2018 as a whole, GDP growth amounted to 2.9 per cent, the government said, the best showing since 2015. It was just below the 3-percent pace the administration has said it can maintain consistently. By contrast, most economists foresee slower growth ahead. For the current January-march quarter, many analysts say they think growth could slow to a 2-percent annual rate or less.

“I think the economy will be steadily throttling back over the next two years,” said Mark Zandi, chief economist at Moody’s Analytics.

The economy’s pace of expansion last quarter reflected a slowdown in consumer spending and the start of a 35-day partial shutdown of the government, which subtracted an estimated 0.1 percentage point from growth. That weakness was offset somewhat by a gain in business investment and less of a drag from trade.

The Us$1.5-trillion tax cut that President Donald Trump pushed through Congress in late 2017 and billions of extra dollars in government spending that Congress added for military and domestic programs helped accelerate the economy last year.

In the view of most economists, though, 2018 may have been the economy’s high point for some time. Many are forecasting growth this year will slow to around 2.2 per cent and weaken further in 2020. Some analysts think the economy could even dip into recession next year as support from the tax cuts fades and the global economy sputters.

Zandi has forecast growth of 2.5 per cent this year and just above one per cent in 2020 and estimates the chance of a recession starting in 2020 at about 50-50. The National Association for Business Economics said this week that roughly half the economists who responded to its latest survey expect a recession to have begun by the end of 2020. The forecasts from the Trump administration are far rosier. Its officials have projected the administration’s policies will produce growth surpassing three per cent in coming years.