Published: Sat, January 28, 2017
Medical | By Ismael Lynch

US Q4 GDP Expansion Brakes Due to Dismal Foreign Trade, Structural Weakness

US Q4 GDP Expansion Brakes Due to Dismal Foreign Trade, Structural Weakness

Compared to the same period a year earlier, GDP increased 2.2%, also in line with the previous quarter's annual gain and compared to forecasts of 2.1%.

Gross Domestic Product is considered the broadest measure of a nation's economic health.

Strong consumer spending helped the United Kingdom grow by a better-than-expected 0.6% in the final quarter of past year and by 2% for the whole of 2016.

While economists look fairly positively on the progress that the USA has made since the recession, current GDP growth is far below the 4 percent target President Donald Trump has said he is aiming for. "Higher inflation and uncertainty over the implications of Brexit are expected to bear down on the UK's near-term growth prospects", he said.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, noted that the change in foreign trade key subtracted a substantial 1.7 percentage points from GDP growth. After adjusting for inflation, such sales grew 2.5 percent last quarter, the fastest since the third quarter of 2015, following a 2.1 percent increase. To be fair, this is down from the third quarter's increase of 3.5%, but the third quarter hit its highest point in three years. It was the worst showing since 2011 and down markedly from 2.6% growth in 2015. It was the largest trade-related drag on overall growth since the second quarter of 2010.

Steady consumer spending and rising business investment suggests the USA economy will continue to expand.

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The Commerce Department said the increase in GDP also reflected positive contributions from private inventory investment, residential fixed investment, non-residential fixed investment, and state and local government spending.

The Office for National Statistics (ONS) report shows that growth seen during the third quarter of 2016 was maintained. It's not quite true that there's nowhere to go but up since we're not technically in recession, but we fully expect to end that streak of sub-3% growth in the next couple of years if the right policies are implemented.

By contrast, the construction and production sector provided only "negligible" contributions to growth, the ONS said.

In a separate report, the Commerce Department said new orders for durable goods fell 0.4% in December, which is consistent with the GDP data but likely will surprise analysts who expected a three percent increase.

Businesses have been reluctant to spend, given the lack of clarity about what the new presidential administration might do in terms of economic policy, trade, government spending, immigration, corporate reforms and regulation, said Bostjancic. A strong USA dollar and falling oil and gas prices had hurt demand for factory products, as drillers ordered less steel pipe and other equipment. Mortgage rates remain low but have risen in recent months, posing a potential headwind for buyer demand in 2017.

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