The U.S. economy notched an average year of growth in 2019.
Gross domestic product (GDP) rose 2.1% in the fourth quarter of 2019, according to Bureau of Economic Analysis data released today. Net exports added 1.5 percentage points, its largest contribution to quarterly GDP growth in 10 years, as global demand picked up and domestic demand waned. Consumer spending contributed 1.2 percentage points, while inventories subtracted 1.1 percentage points. Business spending was a drag on growth for the third straight quarter.
Today’s fourth quarter GDP report officially closed the book on 2019, a curious year for the U.S. economy. As shown in the LPL Chart of the Day, GDP increased 2.3% in 2019, in line with average growth in this economic cycle.
The U.S. consumer was the foundation of the economy, contributing an average of 1.8 percentage points to quarterly GDP growth last year. Consumer incomes benefited from low unemployment and solid job creation, while rising stock prices and fiscal stimulus gave household spending an extra boost.
“Trade tensions barely dented consumer activity, leading to a surprisingly steady year for GDP growth,” said LPL Financial Chief Investment Strategist John Lynch. “The U.S. economy proved once again that it can stand resilient against global headwinds on the basis of solid fundamentals.”
However, growth in other sectors in the economy stagnated under global pressures. Business spending showed no real advance as companies backed off from new capital investments in the face of elevated global uncertainty. Declining exports were a meaningful drag on growth in the second and third quarters of 2019, even though exports rebounded relative to imports last quarter.
Moving into 2020, we hope the global economy picks up some steam and corporations ramp up spending. However, even with the recent de-escalation of U.S-China trade tensions, global uncertainty is still high, particularly as cases of coronavirus continue to increase and disrupt China’s local economy.
We’re hopeful the U.S. consumer continues to power the expansion, and trade clarity may present the opportunity for upside, but overall, we think U.S. economic growth will slow to about 1.75% this year.
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Please read the full Outlook 2020: Bringing Markets Into Focus publication for additional description and disclosure.
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