The U.S. economy reverted to a sluggish pace of growth in the fourth quarter of 2016 but still ended the year with some momentum going into the first quarter of 2017.
In its first of three official estimates, the Commerce Department said gross domestic product expanded at an inflation and seasonally adjusted annual rate of 1.9% in the fourth quarter from the previous three months, easing considerably from the third quarter’s 3.5% growth spurt.
For all of 2016, the U.S. economy grew just 1.6% for all of 2016, down from 2.6% the previous year and the worst performance since 2011.
According to the Los Angeles Times, the report “showed how difficult President Trump’s vow of 4% annual growth will be to achieve.”
“I almost want to say 4% is out of reach. It’s a huge stretch,” said Scott Anderson, chief economist at Bank of the West.
But he also noted that economic growth averaged a 2.7% annual rate in the second half of the year, a marked improvement from the first half’s 1.1% growth pace. “It shows the U.S. economy expansion has some momentum going into the first quarter of this year,” he said.
As The Wall Street Journal reports, the fourth quarter saw solid consumer spending, a pickup in business investment, a rebound for home construction, and increased spending by state and local governments. A widening in the foreign-trade deficit weighed on growth, offset in part by a buildup in business inventories.
Exports fell 4.3% after a 10% increase in the previous quarter, as the strong dollar and economic troubles abroad reduced demand for U.S. products. Net exports subtracted 1.7 percentage points from GDP growth, the largest trade-related drag on overall growth since the second quarter of 2010.
Anderson is forecasting 2.2% annual growth this year and 2.8% next year, anticipating that tax cuts being pushed by President Trump and congressional Republicans won’t happen until at least the fall.
“Even though overall growth slowed, the underlying economic strength was solid during the final quarter of 2016,” Sung Won Sohn, an economist at Cal State Channel Islands, told the Times.