Sharp fall in exports slows United States growth

28 January, 2017, 00:53 | Author: Joy Garcia
  • UK ends 2016 with better than expected growth

US real gross domestic product grew at an annual rate of 1.9% in the fourth quarter, according to the "advance" estimate of GDP growth released today by the US Commerce Department.

The breakout third quarter marked a two-year high and came after nine months of anemic gains of about 1% that were largely as a byproduct of meager business investment and stockpiling.

"Our report forecast that SMEs are set to contribute £217bn to the United Kingdom economy by 2020 and it is vital these firms continue to invest and grow, so we can continue to see positive economic progress throughout this year and beyond". The manufacturing and service sector PMIs have risen strongly at the start of the year, and even industrial production jumped sharply in November, suggesting that the weak pound may, finally, start to have an impact on our manufacturing industry. "The last time the USA topped 3% growth - the historical average is 3.3% - was in 2005". Gross domestic product slowed to 1.6% previous year from 2.6% in 2015, marking the smallest gain since 2011.

Ruth Gregory, Britain economist at Capital Economics, a London-based economics consultancy, said he didn't expect the slowdown to be too severe. Economists had expected GDP to climb by 2.2 percent.

Exports, which had been strong, flagged, and imports surged.

President Donald Trump has set a goal of doubling the growth rate through an ambitious stimulus programme featuring tax cuts, deregulation and higher infrastructure spending.

With a labor market at or near full employment starting to lift wages and supporting consumer spending, the outlook for the economy is bright.

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Richard Hogg, Managing Director of Jackson Hogg Recruitment said: "The strength of our increase in GDP is positive news for the North East, and the United Kingdom as a whole, given the climate of post-referendum uncertainty and the need to go into negotiations with the European Union in a strong position". Business spending on equipment rose 3.1% in Q4, marking the first increase after four consecutive quarters of decline, a trend that speaks to overall weakness in business investment.

Economists estimate trade could have subtracted as much as 1.5 percentage points from GDP growth in last quarter, reversing the 0.85 percentage point contribution in the third quarter.

But analysts believe there were signs in Friday's report of a rebound in business spending and housing activity, which could lead to stronger growth in 2017 of around 2.5 percent.

Consumer spending, which accounts for 70 percent of economic growth, slowed to still-solid growth of 2.5 percent in the fourth quarter from a 3 percent gain in the third quarter. A year ago also marked its weakest annual performance since 2011. As a result, trade knocked 1.7 percent from growth in the fourth quarter.

At the end of 2016, exports fell at a 4.3 percent rate, the biggest decline since the first quarter of 2015 and reversing the 10-percent increase notched in the third quarter.

For the fourth quarter the BEA assumed an effective annualized deflator of 2.12%.

Foreign trade was the main drag on U.S. growth in Q4, falling 1.7pc, as the trade deficit has deepened amidst an influx of foreign-made goods into the United States market. Excluding food and energy prices, the PCE price index increased 1.3%, compared with an increase of 1.7%. The stock market is up roughly 9 percent since Trump's surprising electoral victory as businesses gear up to take advantage of Republican policies.

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