The slowdown in US economic growth during the fourth quarter of 2017 was more than it was originally expected to be. The reason for this is believed to be due to increased consumer spending leading to a proportional increase in imported goods. Consumer spending was higher than the previous two years, although one pertinent question could be why that spending was on imported goods rather than on home produced items.
US GDP Expands by 1.5%
The US GDP (Gross Domestic Product) expanded at 2.5%: a lower rate than expected in the 4th quarter, after the good 3.2% of the 3rd quarter. The start of 2018 is also showing signs of an economic slowdown. There appears to have been a decline in retail sales, industrial production and property sales (mainly homes) in January.
In addition to this, exports dropped in January leading to a widening trade deficit which will not be good news for President Trump. His administration has forecast an annual growth target of 3% for 2018.
US Economic Growth Projection Lower than Trump Hoped For
Although the tax cut package of $1.5 trillion should stimulate growth, the estimates for GDP growth for the first three months of this year is just 1.8%. Way lower than annual 3% Trump hoped for! This could feasibly lead to a larger Fed interest rate hike than originally expected. March is the date set for the first rate increase.
An improving economy resulted in a surge in consumer spending. Because the US is unable to meet demand from home-grown products, this resulted in a surge in imports. This, in turn, had a negative effect on GDP growth. There had been an increase in exports due to the increased strength of the dollar.
US – EU Trade War a “Good Thing”
Over the past 4 days, Donald Trump has threatened to impose import taxes on EU steel, aluminum, and cars. He believes this to be a partial cause of the US Economic growth slowdown. The EU has retaliated by threatening import taxes on Levi jeans which would hit the company hard. Tit for tat diplomacy in action! According to Trump a trade war between the US and the EU would be “a good thing.” This issue will likely escalate, and we shall report when it does.
