GDP grows 2.6% in fourth quarter, but falls short of Wall Street’s mark

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Bloomberg


The U.S. economy just finished one of its strongest stretches of growth since an expansion begin in mid-2009

The numbers: Consumers and businesses powered the economy to a 2.6% rate of growth in the final three months of 2017, but declining inventories and a wider trade deficit kept the U.S. from hitting 3% mark for the third quarter in a row.

Economists surveyed by MarketWatch had forecast a 3% increase in gross domestic product, the official scorecard for the U.S. economy.

What happened: Consumer spending accelerated to a 3.8% annual pace of growth, the fastest pace in almost two years. Americans spent more on new cars and trucks, clothing and health care, among other things.

Businesses also got into the act. They increased spending on equipment by 11.4%, while investment in new housing jumped 11.6%.

Companies slowed production in the fourth quarter, however. The value of unsold goods, or inventories, fell by $29.3 billion.

The U.S. trade deficit was another anchor on the economy. Imports rose 13.9%, easily outpacing a 6.9 increase in exports. That cut 1.1 percentage points off fourth-quarter GDP.

The annual rate of inflation, measured by the PCE index, rose to 2.8%, the highest pace since 2011. The core PCE rose at a slower 1.9% clip, however.

The Big Picture: The U.S. economy just finished one of its strongest stretches of growth since an expansion begin in mid-2009. Recently enacted tax cuts could help keep the good times going in early 2018.

Market reaction: The Dow Jones Industrial Average












DJIA, +0.54%










 and the S&P 500












SPX, +0.06%










 were set to open higher in Friday trades.



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