U.S. economic growth slows less than expected in Q4 2018

The Commerce Department released on Thursday its "advance" estimate for the U.S. gross domestic product (GDP) for the fourth quarter of 2018, which revealed the U.S. economy slowed less than expected in the fourth of 2018 amid solid consumer and business spending.

According to the estimate, the U.S. real GDP increased at an annual rate of 2.6 percent q-o-q last quarter, after rising by 3.4 percent q-o-q in the third quarter. 

Economists had expected GDP to boost by 2.4 percent. 

According to the report, the gain in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, private inventory investment, and federal government spending. Those however, were partly offset by negative contributions from residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, rose.

At the same time, the q-o-q deceleration in real GDP growth in the fourth quarter reflected decelerations in private inventory investment, PCE, and federal government spending and a downturn in state and local government spending. These movements were partly offset by an upturn in exports and an acceleration in nonresidential fixed investment. Imports increased less in the fourth quarter than in the third quarter.

The PCE price index rose 1.5 percent q-o-q in the fourth quarter, following a 1.6 percent advance in the previous quarter. Excluding food and energy prices, the PCE price index also increased 1.7 percent q-o-q in December-quarter, compared with a gain of 1.6 percent q-o-q in the prior quarter. Economists had expected PCE price index to advance 1.6 percent q-o-q in the fourth quarter, and core PCE price index to increase 1.7 percent q-o-q.