The United States’ gross domestic product growth unexpectedly slowed last quarter amid the government shutdown, while the Federal Reserve’s preferred inflation metric remained high.
GDP growth was just 0.7% in the quarter to December, according to the Bureau of Economic Analysis (BEA). This is well below the previous quarter’s 4.4% increase and under Reuters-polled economists’ estimate of 1.4%.
“Compared to the third quarter, the deceleration in real GDP in the fourth quarter reflected downturns in government spending and exports and a deceleration in consumer spending that were partly offset by an acceleration in investment. The decrease in imports was smaller than in the previous quarter,” the BEA wrote.
The 43-day government shutdown in October and November subtracted roughly one percentage point from GDP, per the BEA.
The personal consumption expenditures (PCE) price index increased 2.9% during the quarter, in line with the BEA’s estimates. The index was up 0.3% monthly in January, slowing slightly from December’s 0.4% growth, and 2.8% year-over-year.
The PCE price index is the Federal Reserve’s preferred inflation gauge. Traders expect a 99% chance that the Fed will keep interest rates steady at its next meeting on 18 March, per CME FedWatch.
Consumer spending grew by 0.4% during the month, just above Reuters-polled economists’ estimates of 0.3%. This was supported by services spending, including a US$37.4 billion rise in healthcare and $24.4 billion growth in housing and utilities.
Personal income was up 0.4% in January, or $113.8 billion, and disposable personal income climbed 0.9%.
