Macro of the Week – US Q4 GDP revised down

Mon 05 Mar 2018

US economic growth slowed slightly more than originally expected in Q4. On Wednesday the Commerce Department released revised quarter-on-quarter growth at an annualised rate of 2.5%, down from 2.6%, although this was in line with economists’ estimates. This compares to an annualised growth rate of 3.2% in Q3. The growth in consumer spending (3.8%, the fastest since Q4 2014) was not matched by companies increasing output, causing the rise in imports to surge by 14.0%, the fastest pace since Q3 2010, rather than the 13.9% originally reported. Rising imports are a subtraction from a country’s GDP, with the increased trade deficit slicing 1.13% from the GDP growth rate. There was also an impact on inventories, which increased by only $8.0bn, rather than $9.2bn. However the lower build up in inventories may prove to be positive for growth in Q1 2018 as companies need to catch up with demand. However, there are concerns that the economy could be losing momentum, having picked up steam in the middle part of 2017. Q1 2018 could be further hit as the US has experienced seasonal slowdowns in recent years, although tax cuts and fiscal spending could accelerate growth later in the year.