Following a delay in reporting caused by the longest government shutdown in the country's history, we finally have the initial Commerce Department data for economic growth in the fourth quarter of 2018.
Not only were there no signs of a coming recession that some had warned about, but also actual gross domestic product growth of 2.6 percent in the quarter exceeded the 2.3 percent consensus estimate of economists polled by Reuters. Those initial Commerce numbers released Thursday provide the first comprehensive look at the economy's performance for the full calendar year 2018, revealing that, by at least one measure, the United States just hit the strong 3 percent growth rate that President Donald Trump had promised on the campaign trail.
In fact, as the Trump administration had forecast, GDP grew by an impressive 3.1 percent between fourth quarter 2017 and fourth quarter 2018. That growth was significantly higher than the Federal Reserve's December 2017 median projection of 2.5 percent growth for 2018.
By a different measure - year-over-year growth - the rate for 2018, compared with 2017, was slightly lower, at 2.9 percent. But according to the White House Council of Economic Advisers, the Q4-to-Q4 calculation is more informative, because it is "closer to what is meant intuitively in discussions of growth during a certain year." While year-over-year growth rates "reflect what happened in the preceding year as well as what happened during the year in question," the CEA explains, the Q4-to-Q4 approach is based solely on how the economy performed during the year in question.
The 3.1 percent Q4-to-Q4 growth rate in 2018 means the United States just had its strongest calendar year of economic growth since 2005, well before the Great Recession.
Where did that growth come from? Consumer spending, which accounts for about two-thirds of U.S. economic growth, was robust, driven by the strongest jobs market in decades, the best wage growth in a decade, low energy prices and increased take-home pay resulting from the 2017 tax cuts. With consumer spending up and the Trump administration having reined in unfriendly regulations, business investment was also strong, accelerating in the fourth quarter and laying the groundwork for future economic growth.
Contrary to the defeatist narrative that many on the left will surely advance, this economic success is a direct result of the president's pro-growth policies. Indeed, the boost in economic growth that the country just experienced nearly matches predictions made by the president's economic advisers, based on the anticipated effects from his economic policies. That is an unusual occurrence in economic forecasting. Those same economic advisers now foresee 3.2 percent growth for 2019.
The U.S. economy isn't just surpassing its own benchmarks; it's also outpacing every other country in the developed world.
For the past year, the United States has been blowing away the rest of the countries in the Organization for Economic Cooperation and Development, the main grouping of the world's developed economies. The fourth quarter numbers confirm that this trend is continuing, while the United States' main developed trading partners go in the opposite direction.
Germany and Italy, for example, both slipped into recession in the fourth quarter. Even the best-performing OECD countries, such as the Britain, are lagging well behind the United States.
Naysayers have been predicting a U.S. recession for months, but the latest GDP growth report strongly contradicts that pessimistic view. Far from shrinking, the economy is growing at a faster pace than it has in well over a decade. Of course, the naysayers also scoffed at Trump's promise to create a roaring economy with full employment and a robust manufacturing sector, but that's exactly what his policies have produced.
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