USA economy picked up in 2017, but growth slowed at year's end

The figure will be a boost for Chancellor Philip Hammond who has warned of Brexit uncertainty shaking the economy

The US economy cooled in the final quarter of a year ago, expanding slower than expected, but 2017 still saw faster growth than 2016, according to government data released Friday.

According to the Commerce Department, the nation's gross domestic product - which is the value of all goods and services produced in the US - rose at an annual rate of 2.6 percent late previous year. That might indicate that the United States economy had an overabundance of inventory in Q4, left over from the previous two quarters of 3% annualized GDP growth. The pace of household purchases which account for about 70 percent of the economy is unlikely to repeat the recent performance with a not so high wage gain and increasing debt loads.

Britain's economy defied expectations by surging in the final three months of a year ago, with annual growth nearly four times higher than economists had expected after the Brexit vote.

The expansion, which began from mid-2009, is the third longest in American history.

Even though the GDP didn't increase as much as expected, the USA economy seems to be doing pretty well.

The report shows "the US economy had plenty of momentum even before the tax cuts take effect this year", economist Michael Pearce of Capital Economics said in a note to clients, referring to a $1.5 trillion tax cut passed by Congress late last year. "The TCJA is expected to provide a modest boost to the US economy over the next few years". Demand has also been buoyed by President Donald Trump's promise of hefty tax cuts, which was fulfilled in December when the Republican-controlled US Congress approved the largest overhaul of the tax code in 30 years. Few economists believe the economy can maintain such a pace these days, given an aging population and meager productivity gains.

Independent economists also predict the cuts will goose the economy, at least in the short term, but not at rates anywhere near what the White House is promising. Businesses are investing aggressively and consumers continue to spend at a very strong pace. Spending on durable goods rose at the fastest rate since 2009.




But autos gained only 0.4 per cent - giving back some of November's post-hurricane bounce, when sales rose two percent as car owners replaced damaged vehicles.

Holiday shoppers were enthusiastic, and spending on business and residential housing was up.

Business investment in new plants and equipment was also strong, rising at a 6.8 per cent rate in the fourth quarter.

Growth was hindered most by a widened trade deficit.

For a better sense of underlying domestic demand, economists look at final sales to domestic purchasers, which strip out inventories and trade, the two most volatile components of GDP.

A reading on core consumer prices, which exclude food and energy prices, showed that the pace of price growth accelerated to 1.9% in the fourth quarter from 1.3% in the third quarter. The expansion is now in its ninth year and is poised to become the country's second-longest on record later in 2018.

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