Market Overview

Q4 GDP Growth Estimate Cut To 2.2%

Q4 GDP Growth Estimate Cut To 2.2%

U.S. GDP growth slowed more than originally estimated in the fourth quarter of 2018, according to the revised GDP numbers reported by the Commerce Department on Thursday.

The Commerce Department reported U.S. GDP growth of just 2.2 percent in the fourth quarter, down from the 2.6-percent estimate originally reported a month ago. The updated fourth-quarter number means full-year GDP growth in 2018 was 2.9 percent.

Why It’s Important

Even after the negative revision, the 2.9 percent full-year number is the strongest growth the U.S. economy has reported since 2005.

Unfortunately, the drop-off between the third and fourth quarters was steeper than expected. Third-quarter GDP growth was 3.4 percent.

What’s more important for investors is 2019 growth numbers, and the Federal Reserve cut its economic growth forecast earlier this month. The Fed is now modeling 2.1 percent growth in 2019, down from previous estimates of 2.3 percent. Still, 2.1 percent growth in 2019 would mark the first time the U.S. economy has growth by at least 1.8 percent for six consecutive years since 1994 through 1999.

The 2.9 percent growth rate in 2018 was likely a disappointment to President Trump, who had called for 3 percent growth on the year. Prior to his election, Trump had even more ambitious GDP growth goals.

“We're bringing it (the GDP) from 1 percent up to 4 percent. And I actually think we can go higher than 4 percent. I think you can go to 5 percent or 6 percent,” Trump said in a debate back in 2016.

What’s Next?

Investors will be watching first-quarter GDP growth numbers closely to see if the downward trajectory spills over into 2019. They will also be watching for further growth cuts from China, Europe and elsewhere as potential red flags for the U.S.

So far, U.S. investors have mostly shrugged off growth concerns in 2019. The SPDR S&P 500 ETF Trust (NYSE: SPY) traded marginally higher Thursday morning and is up 11.9 percent year to date.

Related Links:

Experts Weigh In On Cuts To Federal Reserve Growth Projections

Fed Says No Rate Hikes In 2019; Trump Warns China Tariffs Could Stand For A 'Substantial Period Of Time'


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