US GDP growth falls short of expectations in the fourth quarter of 2016

Economy - Himanshu Gill - Jan 28,2017

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us gdp growth falls short of expectations in the fourth quarter of 2016

The US GDP growth rate slowed down to 1.9 percent in the fourth quarter of the last year, below than the earlier expectations of 2.2 percent, according to the US Commerce Department.

The third quarter growth rate was recorded at 3.5 percent (best in the last two years), whereas yearly GDP growth rate was 1.6 percent. The yearly growth rate was slowest since 2011 and down from 2015 when the world’s largest economy expanded by 2.6 percent.

A strong dollar was named as the key reason the slow growth, as it sent exports tumbling and caused US businesses to import cheaper components from abroad, while exports dropped marginally. However, analysts suggest that increasing consumer spending and higher business investment would continue to boost the economy in future.

In the last three months 0f 2016, US exports fell by a 4.3 percent rate, reversing the 10 percent increase that was gained in the third quarter. This was the biggest quarterly drop in exports since the first quarter of 2015.

Trade took off 1.70 percent points from GDP growth in the fourth quarter after adding 0.85 percentage point in the earlier quarter. This was the biggest drag since the second quarter of 2010. Trade was largely hit from soybean exports, which had fired up GDP growth in the third quarter due to a poor soy harvest in Argentina and Brazil.

President Donald Trump has promised a GDP growth rate of 4 percent, largely by tax cuts and spending on infrastructure. The last time US economy had grown by that rate was in 2000, the year of the dotcom boom when it expanded by 4.1 percent.

Meanwhile, economists suggest that the fall in GDP is highly unlikely to prevent the US Federal Reserve and the Central Bank from raising the interest rates.