ARLINGTON, Va.—The U.S. economy grew by 2.6% in the fourth quarter, according to the Commerce Department's latest initial estimate.
Although the pace decelerated from the third quarter, it remained strong due to consumer spending, said NAFCU Chief Economist and Vice President of Research Curt Long in a NAFCU Macro Data Flash report.
"Consumer spending, which grew by an accelerated pace of 3.8% thanks to stronger vehicle sales, continues to be the main driver of the economy," Long said. "While exports rose during the last quarter, imports grew faster, resulting in a net drag. A sizable slowdown of inventory accumulation also subtracted from growth."
Personal consumption expenditure (PCE) inflation, the Federal Reserve's preferred inflation metric, rose from 1.5% in the third quarter to 2.8% in the fourth quarter. Meanwhile, core PCE inflation (excluding food and energy) increased from 1.3% to 1.9%, Long reported.
Long said the steady growth in the fourth quarter and market signals such as increased household consumption, business investment and housing construction point to a strong 2018.
"The effects of a tightening labor market and tax cuts should contribute to accelerating growth, as well," Long added. "Inflation also picked up in the fourth quarter, which will likely keep the Fed on track to raise rates again in March."
GDP grew 3.2% in the third quarter and finished at 2.3% for the year, Long noted.