U.S. economy grew 2.9% in 2018, highest in 13 years

U.S. economy grew 2.9% in 2018, highest in 13 years

U.S. economy grew 2.9% in 2018, highest in 13 years

The U.S. economy slowed in the final three months of past year to an annual growth rate of 2.6 percent, the slowest pace since the beginning of 2018, as various factors including the government shutdown took a toll on growth.

At the end of 2017, the government passed tax cuts and spending increases.

The US economy kicked into high gear last year, recording the strongest growth in 13 years in the wake of sweeping tax cuts and fiscal stimulus, government statistics showed Friday.

Defense spending grew 3.4 percent last year, the biggest increase in nine years. Shortly thereafter, the combination of the soaring dollar, collapsing oil prices, and spiking credit spreads caused the economy to slow markedly: From the middle of 2015 through the middle of 2016, output expanded at an annual rate of just 1.3%.

Capital Economics chief United States economist Paul Ashworth said he expected growth of 2.2% this year and 1.2% in 2020.

And in the final three months of the year, areas that had seen a post-stimulus boost appeared to be slowing: businesses investment in factory building slowed to its lowest level in a year, and non-defence government spending contracted by 5.6%, its biggest decrease in five years.

White House Council of Economic Advisers Chairman Kevin Hassett on Thursday identified bad math in the latest read on USA economic growth.

For the current January-March quarter, many analysts believe growth could slow to below 2 percent.

"It worked exactly the way I said", Hassett said. Many are forecasting growth this year will slow to around 2.2 percent and slow even more in 2020.

For 2019 as a whole, Hassett said he foresees growth improving to 3.2 percent - well above the expectations of most economists. If it lasts beyond June, it will surpass the decade-long recovery from March 1991 to March 2001.

The labor market is also exhibiting signs of cooling, with a report from the Labor Department on Thursday showing the number of Americans receiving unemployment benefits rising to a 10-month high in the week ended February 16.

Consumption continues to be underpinned by a strong labor market, with inflation-adjusted income at the disposal of households jumping at a 4.2 percent rate in the fourth quarter compared to a 2.6 percent pace in the prior period. Business investment also picked up in the final quarter previous year, a sign that companies are still hiring and investing because they do not see a recession on the horizon. Trump has often cited those performances as evidence that his program of tax cuts, reductions in regulations and tougher enforcement of trade agreements was working.

The fourth-quarter GDP report was delayed by a 35-day partial shutdown of the government that ended on January 25, which affected the collection and processing of economic data. And there will be only two estimates for last quarter's GDP, rather than the usual three.

The increase in consumer spending followed the third quarter's 3.5 percent gain.

Business investment spending came in at a strong 6.2 percent annual rate, up from 2.5 percent in the third quarter.

Government spending grew at a rate of 0.4 percent.

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