The Department of Commerce revised the U.S. economy’s rate of growth in the third quarter of 2018 downward Friday after new data revealed lower consumer spending and exports.
The growth rate of U.S. Gross Domestic Product (GDP), a measure of overall economic activity, was revised from 3.5 percent down to 3.4 percent. GDP is still on track to increase by at least 3 percent over the year, something that has not happened since 2005, according to Axios.
Private inventory investment, a measure of goods produced and held by firms instead of sold, rose with the more complete data, offsetting some of the change in consumption and U.S. exports, according to the Bureau of Economic Analysis.
GDP growth has been driven by tax cuts President Donald Trump signed into law at the end of 2017. The GOP tax bill cut rates for the majority of Americans but lowered state exemptions that may result in some paying higher tax rates, such as people who live in California and New York who generally itemize their taxes. (RELATED: Trump Tax Cuts Spur Unexpectedly High State Revenues)
Tax revenue at state and levels has also increased since the tax bill went into effect.
U.S. President Donald Trump dons a hard hat presented by the National Electrical Contractors Association (NECA) before addressing their convention in Philadelphia, Pennsylvania, U.S., October 2, 2018. REUTERS/Jonathan Ernst
The economic benefits driven by the tax package are being countered by a weak housing market and an increasing trade deficit. Experts expect the GDP’s slowing trend to continue through the fourth quarter of 2018 and into 2019, CNBC reports.
Gross Domestic Income (GDI), another proxy for economic activity, was revised upward from 4.0 percent growth during the third quarter to 4.3 percent. The third quarter GDI growth was a large improvement over the second quarter increase of 0.9 percent.
GDI growth picked up in the second half of 2018 partly because a competitive U.S. labor market is forcing employers to pay more to attract and retain workers. Wages hit 3.1 percent annual growth in November, the first time the 3 percent benchmark has been passed since April 2009.
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