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Economics Gazette

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November 19, 2019

US economic growth slowed slightly more than initially expected in Q4 2017

US economic growthThe US economic growth slowed slightly more than initially expected in Q4 2017, as the strong consumer spending was due to imports and already depleted reserves. The gross domestic product (GDP) increased by 2.5% yoy in the last three months of 2017, instead of the previously reported 2.6%, according to the revised official data. The figures represent a slowdown in economic growth from 3.2% in Q3 2017.

The downward revision of GDP for the fourth quarter largely reflects smaller goods stocks of economists’ expectations.

The economy seems to have lost momentum at the beginning of the year, with recent data showing declines in retail sales, home sales, long-term commodities and industrial output in January. In addition, the deficit in commodity trade expanded last month when exports fell.

The analysts expect Q1 2018 growth to be weak due to a seasonal trend, but likely to accelerate over the rest of 2018 amid a stimulus of tax reform and an increase in government spending. The forecasts for GDP growth for the first three months of the year are for an increase of 1.8%.

The analysts believe the US economy will reach the Trump government’s three-year growth target this year, possibly exerting pressure on the Federal Reserve to raise interest rates slightly more aggressively than expected.

Federal Reserve Chairman Jerome Powell underlined the optimistic economic assessment, stating that his personal forecast for the economy has grown since December. This has led analysts to bet on four interest rates this year.

The Fed forecasts three interest rises and financial markets are expecting the first increase in March.

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