U.S. economic growth cooled by more than initially reported last quarter on revisions to consumer and government spending, signaling mounting challenges to the expansion as it nears a record duration.
Gross domestic product grew at a 2.2 percent annualized rate, Commerce Department data showed Thursday, less than the initial 2.6 percent reading and projections for a revision of 2.3 percent. Consumer spending, biggest part of the economy, grew at a downwardly revised 2.5 percent pace that also missed projections.
The final reading on a turbulent quarter that included U.S. stocks tumbling to the cusp of a bear market adds to concerns for the world’s biggest economy as global headwinds gather from Europe to China. While Federal Reserve Chairman Jerome Powell said this month that underlying economic fundamentals remain strong, policy makers have cut their outlook for growth this year and next and forecast no interest-rate hikes for 2019.
While the expansion is poised to become the nation’s longest on record at midyear, the downward revision indicates that the economy had weaker momentum heading into 2019, when various indicators in housing and manufacturing have been showing signs of cooling.
Economists surveyed by Bloomberg project that growth in GDP, which measures the value of all goods and services produced in the country, will slow to 1.5 percent in the first quarter, the slowest pace in two years.
The less-robust reading -- which followed 3.4 percent growth in the third quarter -- reflected broad revisions to spending on consumer goods, including recreational goods and vehicles. State and local government spending was downwardly revised on investment in structures, while business fixed investment was reduced on software spending.
3% Milestone
The report kept intact an economic milestone that President Donald Trump has boasted about, as the Republican-backed tax cuts helped bring full-year growth to 3 percent, as measured on a fourth-quarter-over-fourth-quarter basis. That was the fastest since 2005 and compares with the initial reading of 3.1 percent. The White House has set a 3 percent goal for expansion.
Meanwhile, there is some risk that Trump’s tariffs could weigh on future growth. Net exports remained a drag on the expansion.
Excluding the volatile trade and inventories components of GDP, final sales to domestic purchasers increased at a downwardly revised 2.1 percent pace after 2.9 percent in the third quarter. Economists monitor this measure for a better sense of underlying demand.