Consuming Spending and Investment Boost Economy in Fourth Quarter


The U.S. economy cruised to a growth rate of more than three percent largely because of high consumer spending, boosted wages, and news that President Trump’s corporate tax cut would get through Congress. Financial experts are virtually unanimous in their view that this could portend good things for Trump’s promise of sustained three-percent growth for 2018.

Gross domestic product may have increased by three percent annually, which no doubt fueled the three-percent growth rate that economists were seeing. Homebuilding investment and greater government subsidies for other kinds of investment also contributed to an increase in growth, say economists. Inventory investment and a minor slowdown in trade were headwinds that didn’t have much of an impact of robust growth in the overall economy.

The last three quarters of 2017 marked the only time since 2004 that the overall economy has benefited from growth rates of more than 3 percent for three consecutive quarters. The United States, as well as the euro zone economies and Asian economies, appear to be riding a worldwide rebound from the Great Recession and slowed business growth over the last few years.

The Trump administration’s promise of lavish corporate tax cuts likely put more wind in the sails of corporations promising to make domestic investment. Whether those corporations will actually reinvest the windfall gains of Trump’s corporate tax cuts remains to be seen, but news of the tax cuts certainly seems to have brought good tidings to investors. Trump’s tax bill represents the most sweeping change to the corporate tax code since the Reagan administration, a fact not missed by large corporations.

Still, some economists are anxiously taking everything in and determining that overall growth for 2018 could fall well below expectations. Due to slower-than-projected growth already in the first quarter of 2018, many economists are reluctant to say that President Trump’s and Secretary of the Treasury Steve Mnuchin’s projections of three percent growth are achievable. Instead, growth of between 2 and 2.5 percent growth looks more on target for the overall economy in 2018 based on early indications.

This is still a positive development since growth topped out at 1.5 percent in 2016 under the Democratic leadership of President Obama. Moving ahead to 2018, a weakened dollar and rising oil prices are contributing to a more robust global economy. The nominal corporate tax cute in the United States dropping 14 points obviously didn’t hurt one bit.


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