The American economy grew by 2.1% during the fourth quarter of last year.
Martin Crutsinger reported the news for the AP:
The U.S. economy grew at an annual rate of 2.1% in the final quarter of last year, but damage from the spreading coronavirus is likely depressing growth in the current quarter and for the rest of the year.
The overall pace of growth in the October-December quarter was unchanged from its initial estimate a month ago, though the components were slightly altered, the Commerce Department said Thursday. A slowdown in business restocking was less severe than first believed. But a cutback in business investment in new equipment was more of a drag on growth than initially thought.
Economists have been downgrading their forecasts for the first quarter of this year as fears of the impact of the virus has escalated. Stock markets have plunged this week on news that the number of coronavirus cases worldwide has now topped 81,000.
On Thursday, the Dow Jones Industrial Average plunged 4.4%, intensifying a weeklong market rout as investors worried that the coronavirus outbreak will seriously damage the global economy.
The virus, which started in Wuhan, China, has spread to more than 30 countries, including the United States, Italy and South Korea.
Vital supply chains from China that companies in the United States and elsewhere depend on have been disrupted, and that problem is expected to worsen. Microsoft and Apple have warned about adverse impacts from the supply chain disruptions.
Jeffrey Bartash wrote for MarketWatch:
The numbers: The economy expanded at a 2.1% pace at the end of 2019, but the U.S. might struggle to achieve even that modest rate of growth in the months ahead if a new strain of coronavirus isn’t contained.
The government also pegged gross domestic product at 2.1% in its preliminary estimate last month. GDP is the official scorecard for the economy.
The economy had been growing at a similar pace early in 2020, but signs are starting to suggest that the global outbreak of the COVID-19 illness could hurt the U.S. in the late stages of the first quarter. Tourism and travel-related businesses are already feeling the ill effects and tech giants such as Apple AAPL, -3.57% have warned about potentially softer sales and profits.
What happened: Consumer spending, the main engine of the economy, was revised down a notch to show a so-so 1.7%% pace of growth in the fourth quarter. Outlays had risen 3.2% in the prior quarter.
The trade deficit was also sharply lower, giving the biggest boost to GDP. Exports rose a revised 2% instead of 1.4%. The decline in imports was little changed at 8.7%.
As reported last month, soft business spending acted as a ball and chain on the economy in the fourth quarter.
Lucia Mutikani from Reuters noted:
Though other data on Thursday suggested some stabilizing in business investment in January and the labor market remained solid, that failed to calm jittery investors. Wall Street’s main indexes dropped for the sixth straight session and slid into correction territory. The yield on the 10-year U.S. Treasury note touched an all-time low for the third consecutive day.
“Markets are voting and saying they think the U.S. is on its way to recession,” said Chris Rupkey, chief economist at MUFG in New York. “And frankly at this stage after the coronavirus-related slowdown in travel plans that has busted the global supply chain apart, it will be a miracle if we avoid a recession.” Gross domestic product increased at a 2.1% annualized rate, supported by a smaller import bill, the Commerce Department said in its second estimate of fourth-quarter GDP. That was unrevised from last month’s advance estimate and matched the growth pace logged in the July-September quarter.
The economy grew by an unrevised 2.3% in 2019, the slowest annual growth in three years and missing the White House’s 3% growth target for a second straight year.
