Consumers are picking up the lagging business sector's slack

Reproduced from LPL Research; Note: "Other components" includes housing, inventories, trade and government spending; Chart: Axios Visuals

The narrative of the U.S. economy lately has been strong consumer spending as the cornerstone of growth, offsetting lackluster business investment.

Driving the news: Economists pared down estimates for Q4 GDP — prompted by worse-than-expected economic data on Friday. The downgrades would have been worse, if not for retail sales figures that pointed to a solid, but slightly more cautious, consumer.

What's going on: The New York Fed now predicts the economy will grow just 0.4%, down from its prior forecast of 0.7%. Meanwhile, the Atlanta Fed trimmed its estimate to 0.3% from 1.0%.

  • Goldman Sachs cut its estimate too on Friday, per CNN, though at 1.9% it's far rosier than the regional banks' projections.

What they're saying: "Consumer spending has largely propelled GDP over the past two quarters, countering business spending’s noticeable drag on growth," analysts at LPL Financial write.

The big picture: President Trump's tax cut jolted business investment initially, but it "quickly dwindled," as the New York Times reports. Now spending by corporations on factories and other investments is contributing less to GDP than before Trump took office.

  • "Some conservative economists and business leaders say the effects of the tax cuts were undercut by uncertainty from Mr. Trump’s trade war, which is slowing global growth and prompting companies to freeze projects," the NYT notes.
  • "Other economists say the fizzle is predictable because high tax rates were not holding back investment."

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