Sun Sentinel Palm Beach Edition
U.S. growth slows to 2.6% at end of last year
Report shows GDP’s 2.9% in 2018 the best showing since 2015
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.
The nation’s gross domestic product, the broadest gauge of economic health, expanded at a 2.6 percent annual rate in the October-December period, the Commerce Department said in a report released Thursday. That was down from a 3.4 percent rate in the July-September period and a sizzling 4.2 percent 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 percent, the government said, the best showing since 2015. It was just below the 3 percent annual pace that President Donald Trump and several Republican lawmakers had said would be easy to maintain consistently after the stimulus from the tax cuts that took effect at the start of last year.
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 $1.5 trillion tax cut that 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.
But the decline in growth at the end of 2018 means Trump failed to achieve something Republicans repeatedly criticized President Barack Obama for failing to do: have the U.S. economy grow at least 3 percent in a calendar year.
The best calendar year under Obama was 2.9 percent in 2015. The economy grew 2.2 percent in Trump’s first year in office.
Larry Kudlow, the top White House economic adviser, said Thursday that although the calendar-year figure came in just below the administration’s goal, the economy grew 3.1 percent comparing the fourth quarter of 2017 to the fourth quarter last year.
“I would just call it a 3 percent year,” Kudlow told CNBC. “The policies are working.”
But that’s not the bar Trump and Republicans set. They did not round up the 2.9 percent growth in 2015 under Obama to 3 percent. And they specifically targeted calendar-year growth because Obama presided over three 12-month periods in which U.S. growth exceeded 3 percent.
The first of those periods was October 2009 through September 2010. Then there were two overlapping periods: April 2014 through March 2015 and July 2014 through June 2015.
In the view of most economists, though, 2018 may turn out to have been the economy’s high point for some time. Many are forecasting that growth this year will slow to around 2.2 percent and to weaken further in 2020. Some analysts say they think the economy could even dip into recession next year as the support from the tax cuts fades and the global economy sputters.
In a separate report, the government said that applications for jobless benefits, a reflection of layoffs, rose by 8,000 last week to a seasonally adjusted 225,000. The unemployment rate is 4 percent, near a half-century low.