U.S. economic growth unexpectedly slowed in fourth quarter in surge of robust imports

Vastavam web: U.S. economic growth unexpectedly slowed in the fourth quarter as the strongest pace of consumer spending in three years resulted in a surge in imports.Gross domestic product expanded at a 2.6 percent annual rate in the fourth quarter, compared to 3.2 percent in the third quarter, restrained by a widening trade deficit and only modest inventory accumulation, the Commerce Department said on Friday.Imports, which subtract from GDP growth, increased at their fastest rate in more than seven years. Rising imports underscore the challenges that the Trump administration faces in its quest to boost annual GDP growth to 3.0 percent. They indicate that U.S. companies lack the capacity to meet buoyant domestic demand.

“Domestic demand is strong, really strong, and perhaps beginning to push against the capacity constraints of the economy,” said Paul Mortimer-Lee, chief market economist at BNP Paribas in New York. “And this precedes effects from tax cuts.”Strong domestic demand is part of a synchronized global rebound that includes the euro zone and Asia.Economists polled by Reuters had forecast the economy growing at a 3.0 percent pace in the final three months of 2017.

They expect annual GDP growth will hit the government’s 3.0 percent target this year, spurred in part by the tax cuts, a weak U.S. dollar, rising oil prices and a strengthening global economy.“Once the temporary boost from the tax cuts has faded, households’ disposable income gains won’t be strong enough to sustain similarly large increases in consumer spending that we have seen over the past several years,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.“And with the savings rate close to a record-low, the ammunition from that side has gotten limited as well.”