Select Page

The U.S. economy grew at a 2.1% annualized rate in the fourth quarter. That matches the growth rate for the third quarter and is slightly above the 2% growth predicted by economists surveyed by Bloomberg. Full-year GDP growth finished at 2.3% in 2019, the lowest of the Trump administration. Economists are expecting growth to moderate in 2020.

Remember that this is a backward looking number that includes the effects of the truce in the U.S.-China trade war but that does not include the economic effects of the Wuhan-centered outbreak of coronavirus.

Looking below the headline growth, I see a few areas of concern for the economy in 2020. Consumer spending decelerated to show just a 1.8% gain. A number called final sales to domestic purchasers, which excludes the effects of trade and inventories, grew by 1.6% in the quarter, the slowest growth for the  year. Excluding government spending the final sales growth rate drops to 1.4%, the weakest in four years. Nonresidential business investment fell for a third straight quarter with the annualized decline for the quarter coming in at 1.5%. Nonresidential business investment had dropped at a 2.3% rate in the third quarter. With nonresidential business investment now notching a third straight quarter of decline, the slide is now the longest since the last recession. Lower interest rates and the December 2017 tax cuts for corporations have not produced an upturn in business investment.

The autoworkers strike at General Motors took a one-time 0.81 percentage point bite out of GDP growth for the quarter. e most since late 2015.  GDP excluding auto production climbed 3% in the fourth quarter after gaining 1.3% in the previous period.