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(1/n) A quick thread on a few things to note about today’s data from the BEA on GDP growth in the last quarter of 2018
(2/n) It’s a month late – the shutdown essentially forced BEA to cancel their “advance” estimates of GDP growth which normally would have come out in late January
(3/n) Growth in the last quarter of 2018 proceeded at a 2.6 percent annualized rate, down from 3.4 percent growth quarter before
(4/n) Growth in year-round 2018 compared to 2017 came in under the 3 percent growth target (hitting 2.9 percent) often invoked by the Trump administration
(5/n) Growth in 2018 was clearly buoyed by the fiscal stimulus provided by higher levels of discretionary federal spending. For 2018, federal government spending grew faster (2.6 percent) than in any year since 2010, when spending from the Obama-era Recovery Act was at its peak
(7/n) The data show that rising interest rates in recent years are clearly dragging on growth. Residential investment (building and renovating houses and apartment buildings) saw negative growth in every quarter of 2018
(8/n) For the year, 2018 was the first year to see a contraction in residential investment since 2011
(9/n) Also abetted by interest rate increases leading to a higher value of the dollar, the trade deficit provided a drag on growth in 2018 for the fifth straight year (knocking 0.22 percentage points off of the annual 2018 growth rate)
(10/n) Key inflation measures watched by the Fed decelerated in the 4th quarter , coming in below the Fed’s 2 percent target . The price index for personal consumption expenditures (PCE) excluding food and energy rose 1.9 percent compared the same quarter in the previous year
(11/n) These data show very little if any positive footprint from the tax cuts passed at the end of 2017. In terms of stimulating demand, consumption spending grew 2.7 percent in 2018 compared to 2017, the exact same rate that characterized its growth the previous year
(12/n) Business investment (or, nonresidential fixed investment, in the jargon) grew 7.2 percent in 2018, up just slightly over its 6.3 percent growth in 2017. This represents a deceleration of growth in this measure compared to the previous two years
(13/n) Overall message on this report: late and not that great. The economy's still growing and there's no recession red light blinking, but, the caution light of too much monetary policy drag is on. This report should encourage the Fed to stand pat at the next FOMC meeting
