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U.S. economy grows strongly, though not as much as predicted

President Donald Trump responds to a question from a reporter at the World Economic Forum in Davos, Switzerland on Friday. While in Davos, Trump praised strong economic growth in the U.S., though the latest numbers fall short of the heady 4 percent growth he had promised. [(Tom Brenner/The New York Times]
President Donald Trump responds to a question from a reporter at the World Economic Forum in Davos, Switzerland on Friday. While in Davos, Trump praised strong economic growth in the U.S., though the latest numbers fall short of the heady 4 percent growth he had promised. [(Tom Brenner/The New York Times]
Published Jan. 26, 2018

The economy grew at an annual rate of 2.6 percent in the final quarter of 2017, the government reported Friday, finishing off the year on a firm footing — though short of the heady 4 percent annual growth that President Donald Trump has promised.

Combined with a sinking jobless rate, a surging stock market and a sunny outlook, the estimated overall 2.3 percent rise in the nation's output last year is a sign of the U.S. economy's continuing resilience.

Trump inherited an improving economy, and during his first year in office, the trend has continued and growth has accelerated. He called attention to that performance when he took the stage Friday at the World Economic Forum's annual meeting in Davos, Switzerland, where global leaders have been sharing encouraging economic news all week.

"After years of stagnation, the United States is once against experiencing strong economic growth," he said from the podium. "America is roaring back."

Joel Prakken, chief U.S. economist at Macroeconomic Advisers by IHS Markit, said there was plenty to be pleased about. "This was a very solid year, particularly if you look at private domestic demand," he said. "Growth is well above trend."

Holiday shoppers were enthusiastic, and spending on business and residential housing was up. A persistent appetite for foreign goods, however, widened the trade deficit — it reached $50.5 billion in November — and slowed GDP gains. A decline in inventories provided another drag.

The nation's $17 trillion economy recovered from a plodding start in the first three months of 2017, when sharp cuts in consumer spending limited GDP growth to 1.4 percent on an annualized basis. It sprang back over the next six months, with the rate reaching 3.1 percent in the second quarter and 3.2 percent in the third.

The nation's economic dashboard indicates that the United States is poised for faster growth. Proponents of the Republican tax overhaul say it will accelerate investment and spending in the year ahead. And the inventory declines that detracted from GDP growth last quarter should be followed by a burst of spending.

Several analysts and economists, however, argue that it is unlikely that the United States can sustain annual growth of much more than 2 percent given a smaller, aging workforce, sluggish productivity growth and ballooning deficits.