Economy grows a robust 2.6% in 4th quarter
The economy continues to perk along while signs point to even larger growth this year.
The Commerce Department announced the US GDP grew at a strong 2.6% during the 4th quarter last year as businesses indicated increased investment and hiring for 2018.
Gross domestic product—the value of goods and services produced in the U.S.—rose at a 2.6% annual rate in the fourth quarter, the government said. That didn’t match the second and third quarters’ above-3% growth rates, but it exceeded the 2% average that has prevailed since the early 2000s. Output grew 2.5% in 2017 as a whole, the most in three years, and the Federal Reserve predicts 2.5% growth again in 2018.
That puts the economy in unusual territory: not quite booming, but still gaining momentum deep into an expansion. The growth cycle that began in mid-2009 already ranks as the third-longest ever and is set to become the second-longest this spring. Rather than fizzling, the expansion is being spurred on by robust consumer spending and business investment. It isn’t near the vigor of the late 1990s, but that was the last time growth clearly accelerated this deep into an expansion.
“We don’t have a lot of history to guide us here,” said Richard Moody, chief economist of Regions Financial Corp. “It is unusual to see what looks to be a strong acceleration this late in the cycle.”
Investors cheered the latest evidence of an economy that won’t quit, driving up the Dow Jones Industrial Average by more than 100 points, or 0.4%, at midday.
President Donald Trump has pledged to return the economy to a growth rate of 3% or more, pinning his agenda on a $1.5 trillion tax cut he signed into law last month, a rollback of environmental, labor, financial and other regulations, and tougher trade positions. By Mr. Trump’s standard, growth didn’t measure up in the fourth quarter, but the pickup that has played out over the past nine months still has given the president something to boast about.
“There has never been a better time to hire, to build, to invest and to grow in the United States,” he said to business and political leaders in Davos, Switzerland Friday. “America is open for business and we are competitive once again.”
When it comes to the economy, nothing succeeds like success. Expectations are growing in the business community which leads to an uptick in the psychological indicators that drive the US economy forward.
Consumer confidence is up. So is business confidence. Investor confidence is evidenced by a 44% increase in the value of stocks since Trump took office. The future is driving the present, and with the effects of the tax cut yet to be felt, we can expect further strong growth throughout this year.
What does this for the political fortunes of Republicans? According to RealClear Politics, the lead by Democrats over Republicans in the generic ballot for the House has shrunk 40% since the passage of the tax bill.
But voters don't usually vote on future prospects. When experts say they "vote their pocketbooks" they mean what their personal economic situation is at the time they go to the polls. But there are also intangibles like how secure they feel in their job. All indicators point to the fact that voters should be feeling pretty good by November of this year.
Will that translate into the GOP keeping the House and perhaps increasing their margin in the Senate? Despite the massive media assault on Trump and the Republicans, the economic success of the Trump administration may be enough to allow the GOP to keep their majorities.