US growth is likely to slow from 2.6 pct. pace last quarter

Published 8:24 am Friday, March 1, 2019

WASHINGTON — The U.S. economy turned in a solid performance in 2018, boosted in part by tax cuts and higher government spending. But growth slowed by year’s end, and most economists envision a weaker outlook for the coming months and probably years.

The nation’s gross domestic product, the broadest gauge of economic health, expanded at a 2.6 percent annual rate in the October-December period, the government said Thursday. That was down from a 3.4 percent rate in the July-September period and a sizzling 4.2 percent pace from April through June. During those months, the economy benefited from tax cuts and from higher government spending, the gains from which are thought to be fading.

For 2018 as a whole, GDP growth amounted to 2.9 percent, the government said, the best showing since 2015. It was just below the 3 percent pace the administration has said it can maintain consistently. By contrast, most economists foresee slower growth ahead. For the current January-March quarter, many analysts say they think growth could slow to a 2 percent annual rate or less.

Email newsletter signup

“I think the economy will be steadily throttling back over the next two years,” said Mark Zandi, chief economist at Moody’s Analytics.

The economy’s pace of expansion last quarter reflected a slowdown in consumer spending and the start of a 35-day partial shutdown of the government, which subtracted an estimated 0.1 percentage point from growth. That weakness was offset somewhat by a gain in business investment and less of a drag from trade.

The $1.5 trillion tax cut that President Donald Trump pushed through Congress in late 2017 and billions of extra dollars in government spending that Congress added for military and domestic programs helped accelerate the economy last year.

In the view of most economists, though, 2018 may turn out to have been the economy’s high point for some time. Many are forecasting that growth this year will slow to around 2.2 percent and to weaken further in 2020. Some analysts say they think the economy could even dip into recession next year as the support from the tax cuts fades and the global economy sputters.

Zandi has forecast growth of 2.5 percent this year and just above 1 percent in 2020 and estimates the chance of a recession starting in 2020 at about 50-50. The National Association for Business Economics said in a survey released this week that roughly half the economists who responded to its latest survey expect a recession to have begun by the end of 2020.