Coverage: Economic growth is revised upward

The U.S. economy grew at a 2.9 percent annual rate in the final three months of last year, an upward revision that caps three quarters of the fastest growth in more than a decade.

Martin Crutsinger of the Associated Press had the news:

The gross domestic product, the country’s total output of goods and services, grew at a faster clip than its previous estimate of 2.5 percent, the Commerce Department reported Wednesday.

That 2.9 percent fourth quarter advance followed gains of 3.1 percent in the second quarter and 3.2 percent in the third quarter. It’s the strongest nine-month stretch of growth in a dozen years, since the economy expanded at rates of 3.7 percent, 3.5 percent and 4.3 percent from the third quarter of 2004 through the first quarter of 2005

Wednesday’s revision, the government’s third and final look at GDP in the quarter, was better than analysts had been expecting.

“The economy’s wheels were spinning faster than we thought in the fourth quarter,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York. “There is nothing in today’s report that holds the economy back from its historical run to beat the 10-year expansion of the Clinton years in the 1990s.”

Lucia Mutikani of Reuters reported that growth has slowed since the end of 2017:

There are signs that economic activity slowed further in the first quarter, with retail sales falling in February for a third straight month. Housing data have been generally weak and the trade deficit hit a more than nine-year high in January.

The Atlanta Federal Reserve is currently forecasting the economy growing at a 1.8 percent rate in the January-March period. First-quarter GDP growth tends to be weak because of a seasonal quirk.

Still, analysts believe the economy will hit the Trump administration’s 3 percent annual growth target this year, driven by the $1.5 trillion tax cut package and an increase in government spending.

That could keep the door open to slightly more aggressive interest rate increases from the Federal Reserve this year. The U.S. central bank raised rates last week and forecast at least two more hikes for 2018. The Fed also lifted its economic growth projections for this year and 2019.

Sho Chondra of Bloomberg News reported that household spending could be strong going forward due to the tax cuts:

Household purchases, which account for about 70 percent of the economy, also are likely to be supported in coming months by bigger after-tax paychecks and the robust labor market. Continued gains in consumer spending and business investment will help to sustain the expansion even as GDP growth is projected to cool somewhat in the first quarter.

The Federal Reserve Bank of Atlanta’s GDPNow tracking estimate for the current quarter was at 1.8 percent as of March 23. The median forecast in a Bloomberg survey of economists showed a 2.5 percent pace. While the survey shows consumer spending slowing to a 2.1 percent rate, Fed officials remain upbeat about the prospects for households.

Policy makers this month boosted their median forecast for economic growth this year to 2.7 percent from 2.5 percent at their December meeting. The expansion, now in its ninth year, is poised to become the second-longest on record later in 2018.

Price data in the GDP report showed inflation is hovering near the Fed’s 2 percent goal. Excluding food and energy, the central banks’s preferred price index that is tied to personal spending rose at an unrevised 1.9 percent annualized rate.