US economy grew 2.9pc in 2018, highest in 13 years

The US economy kicked into high gear last year, recording the strongest growth in 13 years in the wake of sweeping tax cuts and fiscal stimulus, government statistics showed yesterday. But the world’s largest economy was slowing toward the end of 2018, suggesting the boom had begun to fade, according to the Commerce Department report. GDP expanded by 2.9 per cent in 2018, up from 2.2pc the year before, approaching the target set by President Donald Trump. But in the October-December period growth tapered down to an annual rate of 2.6pc, from 3.4pc in the third quarter.

The fourth-quarter result, which marked the second quarterly slowdown in a row, was still better than expected, as economists had predicted lackluster consumer spending over the holiday period would take a deeper cut out of growth. The robust data could lend support to Trump and to his critics simultaneously, showing unmistakable economic gains last year, amid brisk job creation, but also supporting the view that this may have been a temporary boost purchased with skyrocketing federal deficits.

The non-partisan Congressional Budget Office predicted last month the US would see respectable but markedly slower growth of 2.3pc this year as the 2017 tax cuts and 2018 fiscal stimulus wear off. The White House however says it expects growth to continue unabated in 2019. The most recent figures were likely little affected by the fiveweek government shutdown, most of which fell in January. And official estimates say took a meagre 0.02pc slice out of the economy. With businesses facing a sudden windfall in tax cuts amid increased government spending, growth zoomed higher in 2018 as companies built factories and stockpiled inventories, according to the Commerce Department report, that was delayed by a month due to the government shutdown.

Defense spending grew 3.4pc, the biggest increase in nine years. Trump’s trade war, however, took a nasty bite out of the growth in the third quarter as Washington and Beijing exchanged punishing tariffs on more than $360 billion in twoway trade, a dispute both sides say they are now close to resolving. While the fourth quarter was strong, it was slower than the third quarter, which was slower than the second. In the final three months of the year, areas that had seen a post-stimulus boost appeared to be slowing: businesses investment in factory building slowed to its lowest level in a year, and non-defense government spending contracted by 5.6pc, its biggest decrease in five years.