Remember this fall when Barack Obama insisted that American economic growth was the envy of the world? In 2016, not so much. After a better-than-expected third quarter, growth dropped back down into the stagnation range in the fourth quarter, according to the BEA’s initial estimate:
Real gross domestic product (GDP) increased at an annual rate of 1.9 percent in the fourth quarter of 2016 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.5 percent. …
The deceleration in real GDP in the fourth quarter reflected a downturn in exports, an acceleration in imports, a deceleration in PCE, and a downturn in federal government spending that were partly offset by an upturn in residential fixed investment, an acceleration in private inventory investment, an upturn in state and local government spending, and an acceleration in nonresidential fixed investment.
Even Q4’s annualized growth of 1.9% actually outperformed the year. CNN noted that 2016’s 1.6% growth qualifies it as the worst in five years:
U.S. economy slowed in the fourth quarter. For all of 2016, growth was 1.6%, weakest since 2011. https://t.co/A9OlUXl3FI
— CNN Business (@CNNBusiness) January 27, 2017
That, by the way, is a full point lower than 2015’s 2.6% growth rate — which itself wasn’t anything to write home about. Barack Obama finished his two terms as the first post-war president to fail to achieve 3% GDP growth in any year of his presidency, despite having eight chances at it.
Exports took a big tumble in Q4, falling 4.3% (annualized), and goods exports dropping 6.9%. Those are the worst numbers in almost two years, and it was made worse by imports increasing 8.3%, also the highest number in two years. What makes these numbers strange is that the Q3 numbers were so strong — a 10% increase in exports and only a 2.2% increase in imports. That seems odd but not unprecedented; there was a similarly dramatic shift on exports between 2013 Q4 and 2014 Q1, going from 11.8% to -2.7%, a smaller but still significant change.
Personal consumption, which has driven economic growth ever since the start of the recovery in June 2009, dropped back to 2.5% growth, the lowest since Q1. That’s slightly better than 205 Q4’s 2.3%, but well below the fourth quarter figure in the two years previous.
Finally (so to speak), the upside on this report looks pretty grim. Final sales of domestic product only hit 0.9% annualized growth, which suggests that some of the growth that does appear in this report might be due to inventory expansion. That could tamp growth down in subsequent quarters.
Reuters takes the glass-half-full approach on this report:
U.S. economic growth slowed sharply in the fourth quarter as a plunge in shipments of soybeans weighed on exports, but steady consumer spending and rising business investment suggested the economy would continue to expand.
Gross domestic product increased at a 1.9 percent annual rate, the Commerce Department said on Friday in its first estimate of fourth-quarter GDP. That was a deceleration from the 3.5 percent growth pace logged in the third quarter.
As a result, the economy grew only 1.6 percent in 2016, the weakest pace since 2011. Growth last year was constrained by cheap oil and a strong dollar, which hurt company profits and undercut business investment.
The AP’s Martin Crutsinger takes a more straightforward approach — and a more realistic one:
The U.S. economy lost momentum in the final three months of 2016, closing out a year in which growth turned in the weakest performance in five years.
The gross domestic product grew at an annual rate of just 1.9 percent in the October-December period, a slowdown from 3.5 percent growth in the third quarter, the Commerce Department reported Friday. GDP, the broadest measure of economic health, was held back by a jump in the trade deficit.
For 2016, the economy grew 1.6 percent. It was the worst showing since 2011 and down from 2.6 percent growth in 2015.
That’s the actual news. Clearly the nation has not taken the correct direction when it comes to economic growth over the last eight years, no matter how much self-promotion Obama did over the last few months. That gives the incoming administration a wide opening for its economic policies.