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US Q4 2018 GDP rises 2.6% after government shutdown

The US 2018 GDP exceeded analysts' expectations.

The US fourth quarter(Q4) 2018 gross domestic product (GDP) rose by 2.6%, according to the US Bureau of Economic Analysis. The figures about the US economy surpassed financial analysts’ expectations for 2018, but the quarter results were worse-than-expected.

US Q4 GDP key figures

Consumer spending +2.8%
Exports +1.6%
Imports +2.7%
Retail sales -1.2%
New construction -3.5%

What was positive about the US Q4 GDP numbers?

The US Q4 GDP figures show a strong growth in consumer confidence. Personal consumption increased by 2.8% as Americans spent more money on services like healthcare and new purchases like cars and trucks. Employment figures also surged, with 200,000 payroll increases a month and wages going higher as well. Jim Moran, chief investment officer at Plante Moran Financial Advisors, said that the data shows that the US economy is still strong.

‘For all the hand-wringing and angst, you’d have to go back to 2005 to find a year in which the economy grew at a faster pace,’ said Moran.

What was negative about the US Q4 GDP numbers?

While the US Q4 GDP figures show some strength in the economy, there were still disappointing numbers in aspects of the economy. The decline in the housing market meant a 3.5% dip in new construction. A downturn in retail sales also negatively impacted the GDP.

Government gridlock also contributed to a decline in the US Q4 GDP. The month-long government shutdown may have caused a 0.1% dip in the GDP. There was also a surge in the trade deficit as imports grew faster than exports. Charlie Ripley, senior investment strategist at Allianz Investment Management, noted that the employment numbers and retail figures tell two different stories about the US economy.

‘A healthy labor market has typically been a strong signal for solid consumption and economic growth in the US but weaker than expected retail sales data from December has cast doubts on how resilient the US economy is from the weight of slowing global growth,’ said Ripley.

The US Q4 GDP numbers show that the global economic slowdown hasn’t reached the US yet. However, the figures also show that the US has to overcome trade deficits and a retail sales slump to grow in Q1.

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