The US economy advanced an annualized 2.6 percent on quarter in the fourth quarter of 2018, beating market expectations of a 2.4 percent growth, the initial estimate showed. It follows a 3.4 percent expansion in the previous period. The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, private inventory investment, and federal government spending. Those were partly offset by negative contributions from residential fixed investment, and state and local government spending. Imports increased. GDP Growth Rate in the United States averaged 3.22 percent from 1947 until 2018, reaching an all time high of 16.70 percent in the first quarter of 1950 and a record low of -10 percent in the first quarter of 1958.

The US economy advanced an annualized 2.6 percent on quarter in the fourth quarter of 2018, beating market expectations of a 2.4 percent growth, the initial estimate showed. Fixed investment rose faster, consumer spending remained robust and the drag from net trade was smaller. Considering full 2018, the economy advanced 2.9 percent, above 2.2 percent in 2017 and the highest growth rate since 2015. 

Personal consumption expenditure (PCE) contributed 1.92 percentage points to growth (2.37 percentage points in Q3) and rose 2.8 percent (3.5 percent in Q3). Spending rose less for nondurable goods (2.8 percent compared to 4.6 percent) and services (2.4 percent compared to 3.2 percent) but increased more for durables (5.9 percent compared to 3.7 percent).

Fixed investment contributed 0.69 percentage points to growth (0.21 percentage points in Q3) and rose 3.9 percent (1.1 percent in Q3). Investment rose faster for equipment (6.7 percent compared to 3.4 percent) and intellectual property products (13.1 percent compared to 5.6 percent) but continued to decline for structures (-4.2 percent compared to -3.4 percent) and residential investment (-3.5 percent compared to -3.6 percent).

The contribution from private inventories was 0.13 percentage points, below 2.33 percentage points in Q3.

Exports increased 1.6 percent (-4.9 percent in Q3). Imports rose 2.7 percent (9.3 percent in Q3). As a result, the impact from trade was -0.22 percent, compared to -1.99 percent in the previous quarter which was the biggest drag on growth since the first quarter of 1984. Yet, exports fell a lot in Q3 mainly due to a decline in soybean sales to China after Beijing’s tariffs took effect and imports surged before US import tariffs take complete effect.

Government spending and investment added 0.07 percentage points to growth, below 0.44 percentage points in Q3. It increased 0.4 percent, lower than 2.6 percent in Q3.

The partial shutdown, which began on December 22nd, is estimated to have lowered fourth-quarter GDP growth by about 0.1 percentage point when accounting for the impact of reductions in services provided by the federal government.

Considering full 2018, the economy advanced 2.9 percent, above 2.2 percent in 2017 and the highest growth rate since 2015. The biggest upward contribution came from personal spending (1.81 percentage points compared to 1.73 percentage points), followed by fixed investment (0.91 percentage points compared to 0.81 percentage points); inventories (0.12 percentage points compared to a flat reading); and public expenditure (0.26 percentage poitns compared to -0.01 percentage points). On the other hand, net trade subtracted 0.22 percentage points to growth, compared to -0.31 percentage points in 2017.

Due to the partial government shutdown, the advance estimate of GDP growth was not released and the second estimate was replaced by an intitial report.

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