The U.S. economy grew slightly above expectations in the fourth quarter. According to the advance estimate, the economy grew 2.1 percent, as compared with the consensus expectations of 2 percent, matching its performance in the third quarter.
Personal consumption expenditure slowed down from 3.2 percent seen in the third quarter to 1.8 percent in the fourth quarter. Goods consumption growth drove the deceleration, slowing down to 1.2 percent from 5.3 percent seen in the prior month.
Non-residential fixed investment dropped 1.5 percent for the third consecutive quarter, driven by structures that fell 10.1 percent. Equipment investment also dropped 2.9 percent. As usual, investment in intellectual property bucked the trend, rising 5.8 percent.
Net-trade mainly contributed positively to growth, which added 1.5 percentage points to the headline figure. Exports rose 1.4 percent, but imports dropped 11.6 percent in the fourth quarter. This was countered by a negative contribution from inventory investment, which negatively contributed 1.1 percentage points from growth.
Inflation came in weak in the fourth quarter, with the GDP deflator rising 1.5 percent and the personal consumption deflator rising 1.6 percent.
Today’s data marks the third quarter of economic growth hovering around the 2 percent mark. The days of three percent growth are in the rear-view mirror, but the American economy should continue to expand around this pace to percent pace over the next year, enough to keep downward pressure on the jobless rate and, gradually upward pressure on inflation, said TD Economics in a research report.
“The two elements to watch in the next year are business investment and consumer spending. Investment was the weakest spot for the economy in 2019, beset by trade uncertainty and struggling global growth. With some modicum of certainty on the trade front, this should see modest improvement over the next year. At the same time, consumer spending, which has been a growth stalwart, is likely to slow modestly this year. The fundamentals remain solid, but neither interest rates nor household wealth are likely to be as supportive to spending as they were over the past year”, added TD Economics.
