The U.S. economy grew 2.1% in the fourth quarter of 2019, according to the initial estimate released by the Commerce Department on Thursday. Moreover, economic growth fell to the lowest point in 2019 in comparison with previous years. For example, in 2018, the economy grew 2.9%, while in 2017, the U.S. economy rose 2.4%.
Thus, the world’s largest economy is struggling to deal with problems. In 2019, gross domestic product (GDP) decelerated to the slowest pace due to issues connected with investments.
It is important to note that economic growth fell to the lowest level since Donald Trump became the president in 2017. The Trump administration anticipated that GDP would increase by at least 3% thanks to the stimulus. However, that hasn’t happened yet.
Consumer spending helped to boost the economy in the fourth quarter of 2019. However, spending increased by 1.8%. As a result, it failed to replicate the success of the third quarter. In that quarter consumer spending rose 3.2%. Still, personal consumption expenditures (PSE) added 1.2 percentage points to the quarterly rise. Interestingly, the consumer accounts for 68% of the $21,7 trillion U.S. economy.
In 2019, PSE increased by 2.6% while in 2018, the result was higher by 0.4%. Moreover, the real disposable income rose was up 1.5% in the fourth quarter. For example, in the previous period increased by 2.9%.
The full-year gain rose by 3%. Meanwhile, in 2018 full year gain was 4%. Another indicator that is the savings rate was 7.7%. This result is similar to the one from the third quarter.
U.S. economy and main problems
There are several factors that helped the economy, while other factors had a negative impact on economic growth in the fourth quarter.
One of the biggest challenges for the U.S. economy was the trade war between the U.S. and China. Hopefully, countries made the decision to sign phase one trade deal. Nevertheless, many of the duties remain in place.
In the fourth quarter, durable goods spending rose 1.2% while nondurables rose by 0.8%. In terms of nondurables, this is the worst result since the first quarter of 2018.
Net exports also increased despite the trade war with China. In the last quarter of 2019, net exports rose by 1.4%.
However, imports declined by 8.7% due to consumer goods and motor vehicles.
Let’s have a look at the gross private domestic investment in the quarter. Unfortunately, domestic investment dropped 6.1% in that quarter. Furthermore, gross domestic investment fell for the third quarter in a row. Also, investment in structures declined 10.1%, and equipment, particularly on the industrial side, fell 2.9%.
However, investments in intellectual property products helped to improve the situation to a certain degree.
Additionally, government spending also helped to boost growth. Government consumption expenditures and gross investment rose by 2.7%. Defense spending played a major role.
The U.S. economy continues to grow for more than ten years. However, the economy is slowing down. In the fourth quarter, GDP rose by only 2.1%. Trump administration should pay more attention to these results. This way it will be easier to reduce the risks.
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