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United States economy grows less than expected in fourth quarter

27 January, 2018, 16:43 | Author: Samuel Sharp
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Britain's economy defied expectations by surging in the final three months of past year, with annual growth nearly four times higher than economists had expected after the Brexit vote.

The price index for gross domestic purchases increased 2.5 percent in the fourth quarter, compared with an increase of 1.7 percent in the third quarter.

The UK economy is still struggling to bounce back to levels seen in the final quarter of 2016 when GDP rose by 0.6 per cent.

The report also shows how a widening trade gap can take a bite out of GDP: While strong domestic demand boosted imports last quarter, exports failed to keep pace even with a global growth pickup and a weaker dollar.

With the passage of the tax cut bill last year, economists widely expected the economy would continue steady growth this year.

The economy grew 2.3% for the year, the Commerce Department said Friday. The latest gain in consumer spending added 2.58 percentage points to growth. Economists expect annual GDP growth will hit the government's 3 percent target this year, spurred in part by a weak dollar, rising oil prices and strengthening global economy.

"Trump will be disappointed today after the fourth-quarter GDP figures showed his initial targets have fallen short of the mark, but the United States is still on a sound financial footing", said Dennis De Jong, managing director at UFX.com. That was the quickest pace in three years and followed a 2.2 percent rate of growth in the July-September quarter. That's considerably better than the 1.6 percent print turned in for 2016 - former US president Barack Obama's final year in office.

Declining savings, however, are a concern.

Construction, meanwhile, contracted for the third straight quarter - this time by 1 per cent, while agriculture contracted 0.4 per cent.

Chile is projected to match Colombia's improvement, from 1.7% in 2017 to 3.0% in 2018, while Peru is expected to lead all large Latin American economies with 4.0% expansion in 2018 (and the same rate again in 2019). Growth was partly driven by the strongest holiday shopping season in several years, according to data from Mastercard SpendingPulse.

Ironically, the disappointing GDP numbers may be the result of increased imports in the era of "America First". Experts said that robust consumer spending and business investments, as well as a surging stock market, contributed to the overall economic growth, suggesting robust economic health for this year.

One reason is that household spending will be hard pressed to accelerate further. Core prices - which exclude food and energy - rose at 1.9% rate.

Chancellor Philip Hammond said: 'Five years of sustained growth and record employment are achievements we can be proud of.

The U.S. central bank has forecast three rate hikes this year, the same number as in 2017. The Fed dropped interest rates to historical lows, hoping to prompt businesses to borrow money to make new investments and hires.


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