Red-hot US growth ignores global cooling... for now

brussels — The two best performers among the Group of Seven economies in the third quarter almost certainly took separate paths in the fourth, as Britain suffered a Brexit reality check, while the United States sailed on despite the trade war it has sparked.

The world’s largest economy is expected to have grown by an annualised 2.6 per cent in the final three months of 2018. Even if that is down from the 3.4 per cent of the third quarter, it is still a healthy clip.

A first estimate should have been released by now, but the US Bureau of Economic Analysis said on Thursday the release had been pushed back to February 28 due to the government shutdown.

Forecasts though equate to a quarterly 0.6 per cent, triple the growth rate of the eurozone in the same period. Growth in China, while far higher, cooled to a 28year low in 2018. Japan, the world’s third-largest economy has yo-yoed between contraction and expansion throughout the year, with a 0.4 per cent growth reading seen for Thursday.

Harm Bandholz, chief US economist

at UniCredit, says that despite unstable politics in Washington, two factors explain why the US economy is one of very few holding up well in recent months — massive stimulus mainly from tax cuts and the fact that it is relatively closed and not dependent on foreign trade.

In the very short term, the government shutdown, which could resume next Friday, and the polar vortex of late January could rein in first quarter expansion.

Longer-term though, even the Federal Reserve has become more hesitant, signalling last month at least a pause to its monetary policy tightening due to a cloudier outlook and growing risks. —