As the United States Commerce Department downgraded their forecast for the country's economic growth for the fourth quarter of last year, economists are now predicting a continuing trend that indicates a slowing economy. The United States economy only grew slightly at the end of last year. The slowdown was apparently caused by a number of political and economic factors, including the recent trade tensions, which are all contributing to the slump.
The forecasted growth of 2.6 percent was downgraded by the government agency to 2.2 percent in the fourth quarter last year. The revised number was based on a more comprehensive look at economic data, which is now much more complete when compared to when they had announced the first prediction. The overall growth rate for 2018 was also downgraded from 3.1 percent to only 3 percent.
The data also suggested that the country's consumer spending had decreased. This was also true for state and local government spending across the country. Business investments were also sluggish last year, partly contributing to the slowing growth. Job generation last year was also relatively low, with the trend now spilling over to 2019. Reports have indicated that the economy may be losing steam with only 20,000 new jobs added in the last month alone.
President Donald Trump had previously made a 3 percent growth rate an important talking point in his administration. He made it clear that it was important that the economy grows at that rate or higher in the next few years. Trump's budget even revolves around sustained growth, but the data suggest that this may not be the case given the downgraded rate for last year.
According to the Commerce Department, the country's economic growth had peaked around the second quarter of last year, reaching nearly 4.2 percent. However, the numbers have gradually been declining after that period. Numerous other indicators have also now shown a possible recession in the economy, including the recent drop in stock indexes and the bond market.
According to Ben Herzon of Macroeconomic Advisers, he had already expected a revision of the country's GDP growth as they had already seen a slowdown in the economy from unsustainable rates. Herzon explained that the spike in the second quarter was just caused by fiscal stimulus from increased government spending and various tax cuts. However, those factors gradually lose their effect, which will lead to a slower growth rate down the road. The economic research firm even predicts that the growth rate in the coming periods may grind down to 2 percent or lower.
