The US economy grew slower than expected in the fourth quarter, according to the Commerce Department’s first estimate of Gross Domestic Product (GDP) released on Friday.
The value of everything produced domestically rose at an annualized rate of 2.6%. Economists had forecast 3% growth, according to Bloomberg.
Still, consumer spending, which is the biggest contributor to growth, grew at its fastest pace in more than a year, by 3.8%. Growth was partly driven by a strong holiday shopping season; data from Mastercard SpendingPulse showed that sales from November 1 through Christmas Eve rose 4.9% year-on-year, the strongest pace since 2011.
The housing market also ended the year on a sound note, with the numbers for December showing that new residential construction rose to a 10-year high in 2017.
“The quarter overall witnessed the firmest annualized run rate in control retail sales (ex. autos, gasoline, building materials) since September 2003,” said Tom Porcelli, the chief Us economist at RBC Capital Markets, in a preview. “It clocked in at a very impressive +8.9%.”
He continued: “With all that said, one area of significant uncertainty is inventory investment.”
President Donald Trump has touted an annual 3% GDP growth rate as a target for his administration, which was achieved in the second and third quarters. Friday’s initial print on the fourth quarter will be revised two more times.