US GDP grew 2.6% in Q4 of this past year, a slight decline from 3.1% in Q2 and 3.2% in Q3. Economists had expected a 3% growth due to President Trump's success in boosting business confidence through the cutting of corporate taxes, but the increase in consumer spending resulted in a 13.9% increase in imports when compared to Q3, so that jump in imports, ultimately, hurt growth as a whole. The tax cuts imposed by the Trump administration are expected to boost growth in 2018, but continuing the trend of a 3% increase seems to be a bit questionable.
With the holiday season in Q4, this was the driving force behind the increase in imports, so chances are it is still possible for the economy to continue to grow at a 3% rate, because consumers are benefitting from sturdy job and income growth and record stock prices. This was the government's first estimate for economic growth in Q4 and they plan to release two more updated publication in the near future, so time will tell if the 2.6% is as accurate as initially thought.
https://www.usatoday.com/story/money/2018/01/26/economy-grew-2-q-4/1067535001/
5 comments:
It will be interesting to see the effects of Trump's tax cuts on GDP in Q1 of 2018. In theory, consumers will have more disposable income, thus consumer spending should increase (especially since interest rates are so low), which will lead to a higher GDP. However, if imports continue to increase as well, it will be tough to tell how much GDP will change.
I honestly think we have started to see a boost in the economy represented by the record highs in the Dow. However, with the reduction in money taken in by the government, government spending will definitely decrease which may lower GDP. It will be interesting to see which government programs get cut.
I wonder when we will see the true results from Trump's tax plan. I read an article a couple months ago that predicted the tax plan will cause short term growth, but could also bring higher inflation and more government debt. Only time will tell.
It is interesting how most of the articles talk about how the tax cuts are helping the economy and are making growth increase and make companies open new factories and even move to the US to open up a factory. But how much is the government giving up and how many social programs that go to the lower income families is the government going to have to shut down because of this?
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