US economy shifts into low gear as fiscal boost wanes

WASHINGTON: The US economy slowed more than initially thought in the fourth-quarter, keeping growth in 2018 below the Trump administration’s 3 per cent target, and corporate profits fell by the most in a year after a one-off boost from lower taxes.
The economy is losing momentum as stimulus from the White House’s $1.5 trillion in tax cuts and a government spending blitz diminishes. It is also facing headwinds from slowing global growth, Washington’s trade war with China and uncertainty over Britain’s departure from the European Union.
The darkening clouds over the economy contributed to the Federal Reserve’s decision last week to bring its three-year campaign to tighten monetary policy to an abrupt end. The US central bank abandoned projections for any interest rate hikes this year after increasing borrowing costs four times in 2018.
“The trend in quarterly growth is clearly on the wane,” said Curt Long, chief economist at the National Association of Federally-Insured Credit Unions.
“The strength of the labour market should be enough to postpone a recession for at least this year, but the margins are getting smaller, and it would not take much to tilt growth into negative territory.”
Gross domestic product increased at a 2.2 per cent annualised rate, the Commerce Department said in its third reading of fourth-quarter GDP growth on Thursday. That was down from the 2.6 per cent pace estimated in February.
The economy expanded at a 3.4 per cent pace in the third-quarter. For all of 2018, the economy grew 2.9 per cent as previously reported. Annual growth still missed the White House’s 3 per cent target despite the massive fiscal stimulus. Growth last year was, however, the strongest since 2015 and was an acceleration from the 2.2 per cent logged in 2017. — Reuters