Weak exports seen crimping US Q4 economic growth

US economic growth likely slowed in the fourth quarter as a plunge in shipments of soybeans weighed on exports, but a healthy increase in consumer spending and rising business investment should underscore the economy’s underlying momentum. 
Gross domestic product (GDP) probably increased at a 2.2 percent annual rate after accelerating at a 3.5 percent pace in the third quarter, according to a Reuters survey of economists. 
“Trade was a big boost to growth in the third quarter, that is going to reverse,” said Gus Faucher, a senior economist at PNC Financial Services Group in Pittsburgh. “Consumer spending, business investment and housing will add to growth, so we will still see a solid improvement in the fourth quarter.”
But fourth-quarter GDP data could surprise on the upside after data on Thursday showed a drop in the goods trade deficit in December and a jump in wholesale inventories. The Atlanta Federal Reserve is forecasting the economy growing at a 2.9 percent rate in the fourth quarter.
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. Most of the drag is expected to come from soybean exports, which fired up GDP growth in the third quarter after a poor soy harvest in Argentina and Brazil.
With a labor market that is at or near full employment starting to lift wages and supporting consumer spending, the outlook for the economy is bright. Growth this year could also get a boost from President Donald Trump’s pledge to increase infrastructure spending, cut taxes and reduce regulations.
Although Trump has offered little detail on his economic policy, his promises have been embraced by consumers, businesses and investors. Consumer and business confidence have soared, while the US stock market has rallied to record highs.
“There is still great uncertainty over the details, particularly in regards to trade policies. That being said, risks to the US growth outlook are likely to the upside,” said Sam Bullard, a senior economist at Wells Fargo Securities in the Charlotte, North Carolina.
A strong economy would also mean further interest rate increases from the Federal Reserve. The US central bank has forecast three rate hikes this year. It raised its benchmark overnight interest rate in December by 25 basis points to a range of 0.50 percent to 0.75 percent.

Source: Arab News