WASHINGTON—The U.S. economy grew 2.2% in Q4 2018, down from the previous estimate of 2.6%, according to revised figures from the Commerce Department.
NAFCU Chief Economist and Vice President of Research Curt Long noted that the revised numbers and recent inversion of the yield curve could signal a future recession.
"The previous estimate had surprised to the upside, and a downward revision was expected," said Long in a NAFCU Macro Data Flash report. "The trend in quarterly growth is clearly on the wane, most likely the result of the fading impact of last year's tax stimulus. Global growth concerns and the recent inversion of the yield curve have many on recession watch."
"The strength of the labor market should be enough to postpone a recession for at least this year, but the margins are getting smaller, and it would not take much to tilt growth into negative territory," Long added.
Specific Revisions
The Commerce Department's revised data revealed that there were numerous downward adjustments to previous growth estimates of GDP components, including consumer spending (+2.8% previous estimate; +2.5% revised estimate), business investment (+6.2% previous; +5.4% revised), residential construction (-3.5% previous; -3.9% revised) and government spending (+0.4% previous; -0.4% revised).
Contributions to growth of real GDP came from gains in personal consumption expenditures (PCE) (+1.7%), business investment (+0.7%) and inventory accumulation (+0.1%). Residential construction reduced growth by 0.2%, as did trade (-0.1%) and government spending (-0.1%).
PCE inflation, the Fed's preferred inflation metric, decreased from 1.6% in the third quarter to 1.5% in the fourth quarter. However, core PCE inflation (excluding food and energy) accelerated from 1.6% to 1.8% over that time, according to the Commerce Department.
What GDI Data Show
Real gross domestic income (GDI) growth – an alternative measure often compared to GDP growth – slowed from 4.6% in the third quarter to 1.7% in the fourth. For the year, GDI growth was slightly weaker than GDP growth (2.8% versus 3%). Corporate profits fell by 1.7% in the fourth quarter, but were 11.1% higher than the same quarter a year earlier.