While the Davos World Economic Forum and some of its speakers absorbed a lot of attention, the U.S. economy confirmed it was doing just fine despite some blemishes. The U.S. Commerce Department released fourth quarter (Q4) 2017 “advance” estimates of US GDP on Friday night Australian time and they indicate U.S. GDP grew at an annualised growth rate of 2.6%. The growth rate was under the 2.9% median of market estimates and lower than the third quarter figure of 3.2% but generally economists and other commentators did not seem perturbed.
US GDP numbers are published in a manner which is different to most other countries; quarterly figures are compounded to give an annualised figure. In countries such as Australia and the UK, an annual figure is calculated by taking the latest number and comparing it with a figure from a year ago. The diagram below shows US GDP once it has been expressed in the normal manner.
ANZ senior economist Daniel Gradwell saw some good and bad in the figures. “The increase was slightly below consensus of 3%, but underlying details were reasonable.” However, in a comment reminiscent of the discussion going on in Australia, he remarked on the household income issue. “Durability of consumption growth will be questioned with spending continuing to outpace income growth, pushing the saving rate to a decade low of just 2.6%.”