U.S. Q4 GDP Revised Higher Boosted by Consumer Spending
March 29, 2018 6:41 amVideo
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The Bureau of Labor Statistics (BLS) released the revised GDP numbers for the American economy. The data showed that the economy grew by 2.9%, which was up from the earlier released number of 2.7%. Analysts estimated the data to show a growth of 2.7%. In the third quarter, the economy grew by 3.2% while in the second quarter, it grew by 3.1%.
These growth numbers tend to be volatile and can change significantly from quarter to quarter. The Trump administration has promised that the tax cuts would lead to a sustained 3% growth, which will help the country fund the deficit.
The growth on the economy was mostly attributed to the increased consumer spending. The data showed that in the quarter, the consumer spending grew by 4%. This was higher than what the 3.8% which the analysts were expecting. Investors follow closely the consumer spending data because consumers make the biggest part of the economy.
However, the data also had a major issue. After-tax corporate profits declined by 9.6% from the previous quarter. They were down 6% in the previous year. Pretax profits with inventory valuation and capital consumption adjustments declined by 0.1% in the quarter. A year before, they were up 2.7%. In 2015, the corporate profits in the country dropped as energy prices fell but they have since recovered. Still, they are below record levels.
The data came a day after the closely watched consumer confidence numbers were released yesterday. The data showed that the confidence among the consumers had declined following months of significant gains.
Partly, the reason for the decline was the rhetoric coming from the White House. Trump, the beleaguered president has found himself isolated after losing several close aids. He has also faced the challenge of finding lawyers to represent him in the ongoing Russian probe. Further, he has imposed tariffs on steel and aluminum.
Last week, he imposed new tariffs on China which could lead to higher consumer prices. Yesterday, a report from China said that the two countries were negotiating a deal to prevent a trade war from happening. Today, these hopes were dampened after a report from the Communist Party newspaper said that the country was creating a list of American items to apply tariffs on. This could be the Chinese way of negotiating a deal with the president.
Meanwhile, the dollar gained slightly against the euro. Today, it is up by about 0.30%. The dollar index is higher by almost 0.50%.
The stocks are under pressure following the rout on technology companies. Yesterday, NVIDIA, one of the best performing stock said that it was halting the development of autonomous systems. Its stock price fell by more than 10%. At the same time, social media companies like Facebook and Twitter were down significantly after renewed scrutiny on privacy issues.
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