The US gross domestic product (GDP) grew at an annual rate of 2.9% in the last three months of 2017 instead of the previously announced 2.5%, the Trade Ministry said in its third estimate for the period. The preliminary assessment of analysts was for a GDP growth of 2.7%. It, however, slightly slowed against the third quarter when it reached 3.2%. Over the past year, GDP expanded by 2.3%, rising to 1.5%, which was recorded for 2016.
The -adjusted data for Q4 2017 partly reflects higher consumer spending in the service sector, including car repairs. However, there are signs that economic activity slowed down in Q1 2018, with retail sales falling in February for the third consecutive month. Data on the housing sector is generally weak and the trade deficit has reached a nine-year high in January.
Still, the analysts believe the economy can reach the Trump administration’s target of 3% annual growth this year, backed by large tax cuts of 1.5 trillion USD and increased government spending.
Today’s data could hold the door open to a slightly more aggressive interest rate increase by the Federal Reserve this year. The US central bank raised interest rates last week and forecast at least two more increases in 2018. The Fed also raised its forecast for economic growth this year and 2019.
The consumer spending growth, which accounts for more than two-thirds of US economic activity, was revised to 4% in the fourth quarter of the adjusted growth of 3.8% in the third quarter. This is the fastest rate of growth since the fourth quarter of 2014.
The import data also revised upwards to 14.1% from the previous 14%. This is the fastest acceleration since the third quarter of 2010, overshadowing export growth due to the weakness of the dollar. The rate of increase in business equipment costs was revised slightly down to 11.6% compared with last month’s data for 11.8%.
The investments in housing construction increased by 12.8% instead of earlier rates of 13% after shrinking in two consecutive quarters.
The government spending has risen by 3%, with data revised from the previous 2.9%. This is the strongest growth rate since the second quarter of 2015.