Economy slows to 2.6% in 4th quarter, GDP shows, but consumers and businesses show plenty of resilience
The numbers: A slumping housing market and bigger trade deficit softened up the economy in the final three months of 2018 after a torrid spell of growth in the middle of last year, but consumers and businesses still showed plenty of resilience despite rising headwinds.
The partial government shutdown that began shortly before Christmas may have been enough to prevent the economy from hitting the 3% mark and giving President Trump a symbolic victory. The shutdown may have cost the economy 0.1 percentage point of growth in the fourth quarter, the Bureau of Economic Analysis said.What happened: Consumer spending, the main engine of the economy, increased a healthy 2.8% in the fourth quarter.
The housing market, as expected, was weak again. Investment in new construction fell 3.5%, marking the fourth drop in a row. The rate of inflation slowed a bit. The PCE index rose at a 1.5% pace in the quarter, with the core rate that excludes food and energy up 1.7%. Inflation ran about 2% for the entire year.Big picture: The fourth-quarter GDP report is mainly a look in the rearview mirror, but it does show the economy slowed toward the end of 2018. Trade tensions with China, the fading effects of the Trump tax cuts and slower government spending were some of the contributing factors.
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Economy slows to 2.6% in 4th quarter, GDP shows, but consumers and businesses show plenty of resilienceA slumping housing market and bigger trade deficit softened up the economy in the final three months of 2018 after a torrid spell of growth last spring and summer, but consumers and businesses still showed plenty of resilience. GDP grew 2.6% in the fourth quarter and 2.9% for all of 2018.
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