Solid consumer spending, accelerating business investment and a housing rebound combined to drive fourth-quarter demand in the US economy. Gross domestic product expanded at a 3 percent annualized rate after 3.2 percent in the third quarter and 3.1 percent in the previous period.
Tax cuts championed by President Donald Trump have fueled expectations of an extended boom in capital spending and buoyed household confidence. Maintaining economic growth of at least 3 percent, a goal of the president’s, is a bigger challenge. One reason is household consumption — which accounts for about 70 percent of GDP — may struggle to pick up amid tepid wage gains, rising debt and gradually increasing borrowing costs as the Federal Reserve tightens monetary policy.
The Trump administration has reduced regulatory burdens on businesses and, with the Republican-controlled Congress, slashed the corporate tax rate to 21 percent from 35 percent. Apple Inc., Wal-Mart Stores Inc. and JPMorgan Chase & Co. are among those planning to raise investment, hiring or wages.
James Knightley, ING Bank NV’s chief international economist, is more upbeat. He says improving markets in Europe and Asia also bode well for U.S. growth around 3 percent.
“This fantastic run can continue through 2018 given the great shape the economy is currently in,” Knightley wrote in a Jan. 23 research note. “Domestic demand is powering ahead with housing numbers, retail sales, the state of the jobs market and business surveys all suggesting that momentum is very strong.”