U.S Reported GDP Growth
The United State Commerce Department posted GDP numbers at 2.6% on January 26th for Q4 2017. Those numbers missed Wall Street expectations of 3% but remain much better than the average 2% growth since the early 2000s, and the 1.5% increase in 2016. The United States has not been able exceed the 3% mark for three quarters in a row for 13 years now, during the George W. Bush presidency. The growth was attributed due to increases in personal consumption expenditures, nonresidential and residential fixed investment, exports, and government spending on the local, state, and federal level. Limiting factors included reduced inventories and an increasing trade deficit; imports and exports rose 13.9% and 6.9% respectively, with rising oil prices having a profound impact on the import numbers.
Consumers and businesses powered the economy to a 2.6% rate of gross domestic product growth in the final three months of 2017. But declining inventories and a wider trade deficit kept the U.S. from hitting the 3% mark for the third quarter in a row for the first time in 13 years. Meanwhile, the Federal Reserve projects 2.5% growth for 2018, and other economists expect short-term growth of 3%. Factors such as an aging population and meager productivity growth remain key factors to subdue additional GDP growth.
Inflation rose 2.8% in the Q4, marking the highest quarterly increase since 2011. While 2.8% is above the 2% goal of the Federal Reserve, the year to year number was under 2%. Investors remain curious whether this development will draw comments from the Federal Reserve.
Equities have experienced strong quarterly results as well. Over 70% of S&P 500 companies beat EPS expectations in Q4, with an earnings growth rate of 12.3%.
Keith Knutsson of Integrale Advisors commented, “consumer confidence, according to the OECD, is at the fourth highest level since the 70s, the unemployment rate is incredibly low considering structural and frictional unemployment, and capital investments carry momentum with the new tax plan – the U.S is looking forward with much strength.”