The US economy expanded last year at its slowest annual pace since a manufacturing slowdown in 2016, as consumer spending showed signs of flagging. Gross domestic product rose at a 2.1 percent annualized rate in the final three months of 2019, according to the first estimate from the US commerce department, released on Thursday. That matched the median forecast among economists surveyed by Refinitiv, and was steady from the 2.1 percent pace in the third quarter. For the full year, the economy expanded 2.3 percent, which is down from 2.9 percent in 2018, and well shy of the Trump administration’s goal of 3 percent annual growth.
“In the fourth quarter, a downturn in imports, an acceleration in government spending and a smaller decrease in nonresidential investment were offset by a larger decrease in private inventory investment and a slowdown in [personal consumption expenditures],” the commerce department said on Thursday. Consumers, long held up as the driver of US expansion, showed signs of fading. Household purchases contributed 1.2 percentage points to growth at the end of the year, down from 2.1 percentage points in the autumn. Almost all categories of consumer spending on goods slowed, including cars and furniture.
Household spending on services showed more resilience, although spending on eating out slowed, in a sign of flagging confidence. Over the full year, personal consumption grew 2.6 percent, down from 3 percent in 2018. Analysts fear the market is hooked on Fed support
The data were revealed a day after the Federal Reserve stood pat on interest rates at its first policy meeting for 2020. Chair Jay Powell characterized the economy as “in a good place”. The central bank cut interest rates three times in 2019 but indicated last year it would probably leave its benchmark borrowing rate unchanged this year. The Fed on Wednesday made one change in its policy statement, describing growth in household spending as “moderate” rather than “strong”, as it had previously.