US growth slows after a strong third quarter


Following a 3.5% annualised rise in the third quarter, US GDP slowed to 1.9% in the fourth quarter. Two key shifts explain the slowdown:

  • Consumer spending was slightly slower after two particularly strong quarters;
  • The trade balance pulled growth down, hit by both a fall in exports and a sharp rise in imports.

However, residential and non-residential investment is improving after several quarters of weakness


The poor foreign trade figures are likely to be a one-off. Lower exports are mainly correcting an exceptionally strong third quarter driven by a big jump in soybean exports. The higher import numbers reflect renewed inventory accumulation: It is not uncommon for imports to surge when businesses restock.

Looking at the rest of the data, domestic demand is growing at its highest level since the third quarter of 2015 and is set to remain buoyant. Consumer spending should be underpinned by both new job creations and the faster pace of wage rises. The rise in building permits together with non-residential investment indicators suggest that capex will continue to recover.


The opinion expressed above is dated January 30th, 2017 and is liable to change.

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