U.S. gross domestic product grew at a 2.1% annual rate in the final quarter of last year, the Commerce Department said on Thursday. For all of 2019, economic growth came in at 2.3% — less than the 2.9% in 2018.
Why it matters: The initial estimates from the government show that 2019 was the slowest pace of economic growth since Trump took office. The boost from the tax cuts gave way to pain from the trade war. Exports slumped last year, while uncertain business leaders held off on spending.
Details: Trump succeeded in fundamentally shifting the U.S. trade balance. Net exports added nearly 1.5 percentage points to GDP in the fourth quarter, though experts warn the gain was likely unsustainable.
- Stephen Gallagher, chief U.S. economist at Societe Generale, said he expected a "major reversal" of the trade balance in the first quarter that would deduct one percentage point from first quarter GDP.
- He also renewed the institution's forecast of a recession this year.
By the numbers: Q4 marked the third straight quarter of declining business investment — i.e. corporations investing in new equipment or factories.
- There was a notable decline in inventories while overall gross private domestic investment fell 6.1% during the quarter.
- Consumer spending is still solid, but showed some signs of slowing. The rate of spending was 1.8% in Q4, a drop-off from the 3.2% in the prior quarter.
What they're saying: The report drew the ire of trade groups opposed to Trump's tariffs on China, which remain largely in place even after the "phase one" deal.
- “Tariffs are paid by American consumers and businesses, and prevented the U.S. economy from reaching its full potential last year," according to a statement from Americans for Free Trade, a coalition of businesses, farmers and manufacturers that's launched a multimillion dollar campaign against Trump's tariffs.
- "It’s clear the trade war and tariffs are still impacting American businesses, workers, and consumers."
The bottom line: 2019 GDP came in above the economy's postrecession average of around 2% growth, as Marketwatch points out. Still, annual growth under Trump hasn't hit the administration's promise of 3%.
- What they're saying: Heading into an election year, economic growth is "on unsteady footing," thanks to the indefinite production halt of Boeing's 737 Max and "global growth headwinds that may pick up linked to the coronavirus crisis across the globe," Joseph Brusuelas, chief economist at RSM US, wrote in a note to clients.
Go deeper: Nobel laureate Joseph Stiglitz calls for the end of GDP