Economic Watch: GDP Revised Lower, Consumers Remain Very Upbeat

February 28, 2018

By Evan Lockridge

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The U.S. economy didn’t expand as much as originally estimated in the final quarter of 2017, but it still turned in a solid performance, according to a new Commerce Department report, while a separate report on consumer confidence showed it was at its highest level in more than a decade.

The nation’s gross domestic product (GDP) expanded at an annual rate of 2.5% in the final three months of last year, down from an originally estimated performance of 2.6%, but was in line with analysts’ expectations. This widest messure of economic performance compares to a better pace of 3.2% in the third quarter of the year.

The deceleration in GDP growth in the fourth quarter reflected a downturn in private inventory investment, according to the department.

TD Economics Senior Economist Leslie Preston, Senior Economist described the report as “rather uneventful.” 

“A slight downward revision to growth in the fourth quarter does not change the story for the economy, she said. “Real GDP growth still ran at a healthy pace in fourth quarter, and for the most part, momentum has carried through into 2018.”

Preston noted growth has been well-above the economy's potential growth rate of around 2% and is consistent with ongoing declines in the unemployment rate, which at 4.1% is already below its estimated long-run level.

Other economists believe the economy has slowed further in the current quarter with recent numbers showing retail sales, home sales, durable goods orders and industrial production all declining in January. Also the nation’s trade deficit widened last month as exports fell and imports grew.

Consumer Confidence Best Since 2000

This follows a report from the day before that showed consumer in February hit its highest level in 18 years.

The Conference Board’s Consumer Confidence Index increased in February, following a modest hike in January. The Index now stands at 130.8, up from 124.3 in January.

The Present Situation Index increased from 154.7 to 162.4, while the Expectations Index improved from 104.0 last month to 109.7 this month.

“Consumer confidence improved to its highest level since 2000 after a modest increase in January,” said Lynn Franco, director of economic indicators at The Conference Board. “Consumers’ assessment of current conditions was more favorable this month, with the labor force the main driver. Despite the recent stock market volatility, consumers expressed greater optimism about short-term prospects for business and labor market conditions, as well as their financial prospects. Overall, consumers remain quite confident that the economy will continue expanding at a strong pace in the months ahead.”

The survey, which had a cutoff date of Feb. 15, showed consumers’ appraisal of present-day conditions improved in February and their assessment of business conditions was moderately more positive than in January. They were also more optimistic about the short-term outlook in February while consumers’ outlook for the job market was also more positive.


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