JAKARTA (TheInsiderStories) – The U.S economy recorded significant growth in the last quarter of 2017, stronger than previous years, as consumer spending hit a three-year high and business investment increased.
In the fourth quarter of 2017, its Gross Domestic Product (GDP) grew 2.9 per cent, 0.4 points higher than previously estimated, the Commerce Department said in Washington on Wednesday (28/3). The number also surpassed some analysts’ estimates.
The third and final quarterly estimates of 2017, based on a more complete set of data, marked three consecutive quarters within President Donald Trump’s target range of 3 per cent annual growth.
The latest estimate does not take into account a US$1.5 trillion tax cut that began in December, which economists say could boost growth in the near term at least for the short term.
Consumption hit the highest pace in three years, as consumer spending on goods saw its biggest quarterly bounce in nearly 12 years after an upward revision of three tenths to 7.8 per cent.
“Consumer spending posted the strongest quarter in three years,” said Oxford Economics, adding that tax cuts and stronger government spending will boost GDP this year.
But for the whole of 2017, growth rates are unchanged at 2.3 per cent, faster than 1.5 per cent recorded last year, but still far below Trump’s target and a 2.9 per cent expansion seen in 2015.
The Trump Government calculates the acceleration of growth to pay for December tax cuts, which are expected to increase budget deficits and add to American debt.
However, some economists have highlighted stagnant American productivity and trade warfare that may weigh on growth and warned tax cuts would push US Treasury yields into the red zone.
Upward revisions to fourth-quarter growth estimates come from higher consumer spending, higher inventory of wholesale businesses and updated statistical adjustments to account for seasonal factors, according to the Commerce Department.
Consumption hit a three-year high, as consumer spending on goods rose the most in three years in almost 12 years after the revision rose to 7.8 per cent.
Consumer spending for transportation boosted US services growth to 2.3 per cent in the quarter, up two-tenths of the previous forecast.
The results helped offset economic barriers from surging imports, after the US trade deficit hit a nine-year high in 2017.
Despite accelerating economic growth, corporate earnings remained relatively stagnant this quarter, falling 0.1 per cent after jumping $90.2 billion in the previous quarter.
The financial sector declined $14.6 billion but the non-financial sector increased $19.4 billion for the quarter. Earnings for 2017 rose $91.2 billion after a decline of $44 billion in the previous year.