The U.S. economy quite likely decelerated in the fourth quarter due to weaker than expected consumer spending; faltering exports and the turmoil generated by Trump's trade war.
These factors and other equally negative economic indicators will mean the U.S. economy in 2018 will miss the Trump administration's much ballyhooed 3 percent annual growth target
These downbeat numbers will likely be confirmed by the U.S. Department of Commerce gross domestic product (GDP) report to be issued Thursday. Analysts said this report will reveal the latest assessment of the impact of Trump's economic policies.
These policies include deregulation, the controversial tax cuts, much higher government spending and volatile tariffs aimed at securing more favorable trade deals.
Trump has repeatedly bragged the economy is one of the biggest achievements of his presidency, but government data does not confirm this boast.
Analysts expect Q4 GDP to shrink to 2.3 percent after expanding at a 3.4 percent pace in the July to September quarter. Banks are even more pessimistic about Q4 growth. JPMorgan forecasts a 1.8 percent hike while Goldman Sachs sees a 1.7 percent rise.
The release of the Q4 GDP report was delayed by the 35-day partial shutdown of the federal government by Trump, which ended on Jan. 25. This month-long hiatus affected the collection and processing of economic data, which might mean the actual number might be somewhat lower than expected.
Along with this line, the Atlanta Federal Reserve projects GDP grew only by 1.8 percent in the October to December quarter. If confirmed, this growth will be the slowest in nearly two years.
Economists forecast the economy grew some 2.9 percent in 2018, which will the best performance since 2015, and better than the 2.2 percent growth in 2017.
"This is as good as it gets for the first Trump administration," said Joe Brusuelas, chief economist at RSM in New York.
It's now a well-accepted fact the U.S. economy is slowing down as the boost from the Trump administration's $1.5 trillion tax cut of 2017 and higher government spending fades. U.S. economic growth is also being curtailed by Trump's trade war with China.
Economists say this uncalled for conflict is making businesses and households more cautious about spending. Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, slowed considerably from the third quarter's upbeat 3.5 percent. Then there's the slowing global economy to worry about.
"The tax cut was not a game changer, it did not result in a permanent lifting of the trajectory of growth, just a temporary increase," said Brusuelas.
