The government says the U.S. economy grew more slowly in 2018 than it previously estimated, downgrading its estimate from 3% to 2.5%. President Donald Trump had frequently boasted of the 3% growth figure as evidence that his policies invigorated the economy.
The Commerce Department lowered its estimate of growth from the fourth quarter of 2017 to the fourth quarter of 2018 mainly because businesses spent less on buildings, equipment and software than it had earlier thought.
The department made the change based on more comprehensive data as part of its annual revisions to gross domestic product, or GDP, the broadest measure of the nation’s output of goods and services. The revisions cover the five years from 2014 through 2018.
Overall, the changes don’t significantly alter the broader trajectory of the economy. Growth picked up in 2017 and 2018 after a sluggish 2016, spurred by stronger overseas growth, increased government spending and the Trump administration’s tax cuts.
Still, the revisions mean that growth failed to cross the symbolic 3% threshold last year, which it hasn’t done since 2005. Most economists point to slower population growth and sluggish increases in worker productivity as the primary reasons for the shortfall.
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Most other changes were minor. Consumer spending grew faster last year than previously thought — 3% compared with an earlier estimate of 2.6%. Still, that increase was offset by the reduction in business investment spending.
The GDP figures are revised as the Commerce Department’s Bureau of Economic Analysis incorporates new data into its estimates. The Census Bureau, for example, issued more comprehensive annual data on services spending that showed that companies had invested less in software compared with previous quarterly reports.
Updated data on construction spending also showed that businesses had invested less in new buildings.
Many economists argue that such investment spending has been put off because of the uncertainty raised by Trump’s trade policies, which have imposed tariffs on imports from China, Europe and Japan. Those import taxes have raised costs for many companies, and it’s unclear how long the additional tariffs will remain in place.
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The government says the U.S. economy grew more slowly in 2018 than it previously estimated, downgrading its estimate from 3% to 2.5%https://t.co/yzYcL42sJc
— POLITICO (@politico) July 26, 2019
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