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Economy grew 2.6% in Q4; 2019 growth not expected to slow
The U.S. economy grew 2.6 percent in the fourth quarter of 2018, according to the Commerce Department's first estimate. While growth slowed, it "came in firmer than expected," noted NAFCU Chief Economist and Vice President of Research Curt Long in a NAFCU Macro Data Flash report.
"Prior to the release, the Atlanta Federal Reserve Bank's GDPNow model had produced a forecast of 1.8 percent. Although a growth rate of 2.6 percent is solid and in line with figures over the bulk of the recovery, it does represent a slowdown from earlier in the year and likely reflects the fading impact of the fiscal stimulus," added Long. "However, NAFCU does expect growth to continue to slow this year, and a recession in 2020 is possible."
The Commerce Department's data revealed that consumer spending grew by 2.8 percent and remains the primary driver of the economy. Business investment growth accelerated to 6.2 percent despite headwinds from declining business sentiment and oil production. Residential investment declined by 3.5 percent during the quarter.
Contributions to growth of real GDP came from gains in personal consumption expenditures (+1.9 percent), business investment (+0.8 percent), inventory accumulation (+0.1 percent) and government spending (+0.1 percent). Net exports reduced growth by 0.2 percent, as did residential investment (-0.1 percent).
Personal consumption expenditure (PCE) inflation, the Fed’s preferred inflation metric, decreased from 1.6 percent in the third quarter to 1.5 percent in the fourth quarter. However, core PCE inflation (excluding food and energy) accelerated from 1.6 percent to 1.7 percent over that time.
Fourth quarter measures for real gross domestic income and nominal corporate profits are not yet available, and will be included in future GDP releases.