U.S. Economy Grew 2.9 Percent In 2018, Just Below Trump's Target The U.S. economy expanded at a solid 2.6 percent rate during the last three months of 2018, but growth was significantly lower than it had been earlier in the year as the boost from tax cuts waned.

U.S. Economy Grew 2.9 Percent In 2018, Just Below Trump's Target

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Today the Commerce Department finally released economic growth numbers for the last three months of 2018. The numbers had been delayed because of the government shutdown. As NPR's Jim Zarroli reports, the numbers turned out to be better than a lot of people expected.

JIM ZARROLI, BYLINE: Economic forecasters began to get pretty gloomy late last year. Stocks were plummeting, and there were signs the economies of China and Europe were slowing. Today the Commerce Department said the U.S. economy grew by a very respectable 2.6 percent during the last quarter of the year. Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities.

JARED BERNSTEIN: I think we should be encouraged in the sense that if you were thinking a recession is right around the corner, it just doesn't seem to be the case.

ZARROLI: Throughout the quarter, businesses remained confident. They spent money on new equipment and software. The U.S. exported more. The growth rate for the year as a whole turned out to be around 3 percent, which was what the White House had projected. But the report also suggested the U.S. economy was losing steam as the year went on. During the first half of last year, the economy was enjoying the effects of the 2017 tax cut, as well as a big government spending bill. Both helped juice the economy, and growth peaked in the second quarter, Bernstein says.

BERNSTEIN: We enjoyed what will probably, ultimately, be a year and a half of above-trend growth because of stimulus from the tax cuts and government spending, both deficit finance.

ZARROLI: As 2018 dragged on, growth fell from 4.2 percent to 3.4 percent to 2.6 percent.

BERNSTEIN: That's important because it belies this claim that the tax cuts have permanently put us on a faster growth path.

ZARROLI: Now many economists expect growth to slow even further to 2 percent or less as the impact of the tax cut wanes. Ben Herzon is executive director at IHS Markit.

BEN HERZON: It does go a long way to explaining some of the strength in 2018. But that boost to growth that we're seeing is - that we had seen from that is probably going to fade.

ZARROLI: But today's report is a reminder that there's still plenty of strength left in the economy. Unemployment remains very low, and companies are still spending. The historic economic expansion that the U.S. has enjoyed for nearly a decade continues even if last year's spike is looking more and more like a sugar high. Jim Zarroli, NPR News, New York.

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