The gross domestic product (GDP) in the last quarter of 2018 grew 2.6%, which exceeded expectations. This is the first time since President George W. Bush that we had four straight quarters with GDP growth 2% and up.
Experts thought the GDP, “a broad measure of the goods and services produced across the U.S.,” would land at 2.2%.
While the number is better than expected, it’s quite a fall from the 4.2% in the second quarter and 3.4% in the third quarter. WSJ explained how experts measure the growth:
There are two ways to measure annual growth. One is to measure the nation’s total output for 2018 compared with total output for 2017. By that measure—which offers a look at broader trends—the economy grew 2.9% last year, matching a rate last seen in 2015.The second way is to measure output in the fourth quarter of 2018 versus the fourth quarter of 2017. By this measure—which gives a look at more recent trends—the economy grew 3.1% last year.
The report from the Bureau of Economic Analysis (BEA) showed that “consumers ended the year spending at a slower, but still solid, pace.” That’s quite disappointing considering the fourth quarter contains Christmas. From CNBC:
Employment remains strong, with payroll gains continuing in excess of 200,000 a month and wages rising at the fastest clip of the recovery. However, poor retail sales have raised worries about consumers who drive nearly 70 percent of growth in the U.S.The report also comes amid the White House’s wrangling with China over trade. Officials are hoping to get the broad aspects of an agreement together at ongoing meetings, with higher-level negotiations ahead. The two sides face a March 1 deadline after which tariffs between the two could intensify.A rise in imports helped boost GDP for the quarter.
However, the 2.6% growth is a shock considering the government shutdown began in the fourth quarter. It will be interesting to see how the shutdown affects the GDP of 2019’s first quarter. WSJ wrote that the “forecasting firm Macroeconomics Advisors on Wednesday projected a 1.2% growth rate for GDP in the first three months of the year.”
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