Fourth-quarter GDP increases 2.6%, better than expected

Key Points
  • GDP rose 2.6 percent in the fourth quarter, ahead of estimates of 2.2 percent, according to the Commerce Department.
  • An increase in consumer spending helped boost the number, while imports and residential investment were a drag.
Q4 GDP increases 2.6%, jobless claims 225,000 vs 220,000 expected

U.S. economic growth was better than expected as 2018 came to a close, with GDP rising 2.6 percent, according to a first estimate the Commerce Department released Thursday.

Economists surveyed by Dow Jones expected a gain of 2.2 percent after a 3.4 percent rise in the third quarter. The growth came amid a bevy of uncertainty and a time when the stock market briefly slid into bear market territory.

Growth was helped by a 2.8 percent rise in consumer spending along with increased nonresidential fixed investment, exports, private inventory investment, and federal government spending. Weakness in residential fixed investment, which fell 3.5 percent, and state and local government spending served as a drag. The gross private domestic investment gain slowed to 4.6 percent in the quarter after a robust 15.2 percent rise in the previous period.

Exports rose 1.6 percent in the quarter, reversing a 4.9 percent decline in the previous quarter, while imports increased by 2.7 percent, making trade a slight net negative.

For the year, annual 2018 real GDP increased by 2.9 percent, according to the Bureau of Economic Analysis.

Worries that a global slowdown would infect the U.S intensified during the period, while investors worried that the Federal Reserve would continue to raise interest rates even as financial conditions tightened.

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Even with the weaker fourth quarter, economic growth was solid for the year, after GDP gains of 2.2 percent and 4.2 percent in the first and second quarters respectively. The report also comes on the heels of mixed signs in the economy.

Employment remains strong, with payroll gains continuing in excess of 200,000 a month and wages rising at the fastest clip of the recovery. However, poor retail sales have raised worries about consumers who drive nearly 70 percent of growth in the U.S.

The report also comes amid the White House's wrangling with China over trade. Officials are hoping to get the broad aspects of an agreement together at ongoing meetings, with higher-level negotiations ahead. The two sides face a March 1 deadline after which tariffs between the two could intensify.

A rise in imports helped boost GDP for the quarter.

The government shutdown delayed the release of the GDP estimate, so Thursday's data replaces both the first and second estimate the Bureau of Economic Analysis releases.

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