Published: Sat, January 28, 2017
Health Care | By Gwendolyn Kim

Ahead of the Bell: US economy-GDP

Ahead of the Bell: US economy-GDP

The service sector, which accounts for almost four-fifths of the economy, grew the strongest in the final quarter, up 0.8%, but production's growth was flat and construction increased only slightly.

The Commerce Department says the gross domestic product grew at an annual rate of just 1.9 percent in the October-December period, a slowdown from 3.5 percent growth in the third quarter.

For 2016, the economy grew 1.6%, the worst showing since 2011 and down from 2.6% growth in 2015.

Growth this year could also get a boost from President Donald Trump's pledge to increase infrastructure spending, cut taxes and reduce regulations.

- The contribution from inventories was +1.00%, more than double the +0.49% growth rate recorded during the prior quarter.

However, Rob Carnell, Chief International Economist at ING Commercial Banking, said the two quarters taken together suggest the economy picked up momentum in the second half of the year.

Ruth Gregory, chief United Kingdom economist at Capital Economics, said: "The balance of growth looks set to shift this year". "I know most people say 'Oh, 2 percent isn't that great, ' but in the current world it is".

For the fourth quarter, the biggest factor contributing to the slowdown was a widening in the trade deficit.

'2017 will be a more testing year for the United Kingdom economy as consumer spending will be squeezed by rising inflation.

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Exports slumped by 4.5% in the last three months of the year with most of the hit coming from disappointing soybean sales, which rose sharply in the third quarter after a poor soy harvest in Argentina and Brazil before falling back to more normal levels.

Growth in the fourth quarter was driven by consumption, which posted a 2.5% gain.

The economy grew at a slower pace in the fourth quarter but still turned in a solid performance as consumer spending, housing and business investment offset weak exports.

While headline orders remain in negative territory, business investment appears to be gaining footing, which could be a positive indication for 2017, if said growth can be maintained, said Piegza.

USA economic expansion braked more than expected at the close of 2016 amid the greatest decline in six years in United States foreign trade and lukewarm consumer spending.

It is an exciting time to be watching the economy, as the new administration starts to formulate its policies.

Growth continued to be unevenly balanced, with services, up by 0.8 percent over the quarter.

When asked when the pace of growth will pick up pace, El-Erian said, "The short-term qualifiers relate to the policy formulation process and passage through Congress, together with the absence of large-scale trade disruptions".

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