The economy of the United States expanded in 2018 at a rate of 2.9%, thanks in large part to the impulse of fiscal stimuli. The rhythm is seven tenths higher than that recorded in the previous year and equals that of 2015, but, despite its strength, it remains one-tenth below the target it promised. Donald Trump. There is also much doubt that it can be maintained in 2019.
Growth moderated in the fourth quarter to an annualized rate of 2.6%, from 3.4% in the third quarter and 4.2% in the second quarter. The expansion was only lower between January and March, when it remained at 2.2%. Despite this, this first reading is four tenths better than anticipated. The data is published one month late due to the effect of the partial closure of the Government, which affected the agency that produces the statistics.
Private consumption, which accounts for two thirds of US growth – an economy that relies increasingly on the services sector – advanced at an annualized rate of 2.8% in the last three months of the year, eight tenths less than in the third quarter. This moderation ate the impulse of business investment, which went from growing 2.5% to 6.2%. Exports, on the other hand, advanced by 1.6%, after falling by 4.6% in the three preceding months.
It is, in any case, the first time since 2004 that the economy exceeds the 2% mark in each and every one of the quarters of the year. Half of last year clearly reflects how the fiscal reductions gave wings to growth, but its effect began to wane in the final stretch of 2018 and it is expected to continue diluting in the current year. The Federal Reserve anticipates in its latest projections for 2019 a growth of 2.3%: a more than respectable figure for the standards of an advanced economy, but far from the projections of Trump, both in the 2016 campaign and after accessing the presidency of the first world power.
Jerome Powell, president of the US central bank, already indicated in his half-year intervention before Congress that the expansion will moderate with respect to last year. He also spoke of "conflicting signals" and "cross currents" that justify his being "patient" as he moves forward in the process of normalizing monetary policy. The interest rates are between 2.25% and 2.5%.
Powell said the Fed is ready to pause the balance sheet reduction program if necessary, which currently accumulates assets worth four trillion dollars. Among the factors of uncertainty cited the Brexit, the moderation of the global economy and the tensions of commercial litigation. Many economists expect growth of less than 2% in the first quarter.
Trump promised during the election campaign that the tax reduction and deregulation would take growth above 3% and criticized his predecessor Barack Obama for being the first president of modern history to fall short of that mark. The preliminary data of the Department of Commerce, however, leaves it at the level of the best year of the Democrat in 2015.
The last year of Obama grew by 1.6%. Moody's analysts already say that 2018 is the best record that Trump can have, because in 2020 it will moderate again and it will be placed below 2%. There are economists who even anticipate that a contraction could occur when the full effect of fiscal stimuli is lost. It is a scenario that Powell discards at this time.
Trump's tax reform came into effect in December 2017. When growth exceeded 4% in the second quarter, the Republican made a staging at the White House to claim victory. As Obama, that annualized growth was exceeded in three quarters. But the expansion of the US economy has been very irregular since the financial crisis.
Steven Mnuchin, Treasury secretary, said in July that the economy was well positioned to sustain a growth rate of 3% for four or five years. Kevin Hassett, the White House chief economist, anticipated in December that it would surpass 3% in 2018 and 2019. This pace was justified to generate the necessary revenues to compensate for the tax reduction.
Economists agree that to achieve these growth rates it is necessary to raise productivity earlier, something that the data does not reflect at the moment. Activity in the real estate sector also moderated in 2018. The congressional budget office, like the Federal Reserve, sees long-term potential growth at a level that is closer to 2%.
Larry Kudlow, the White House's chief economic adviser, called 2018 a "very good year", which will be the basis for 2019 "robust". "We are the most buoyant economy in the world," he says, "and will continue to be." Anticipate that the investment will remain strong thanks to the trade agreement with Mexico and Canada. Confidence levels, he adds, will rebound if a pact with China is achieved.