President Harry Truman is
famous for his plea
“Give me a one-handed economist. All my economists say ‘on one hand...,’ then
‘but on the other....’” Harry would have hated yesterday’s Bureau of Economic
Analysis (BEA) report
on gross domestic product (GDP) in the 4th quarter of 2019.
What about top-line growth? On the one hand, the expansion continues. On the
other hand, growth was only 2.1 percent (annual rate) in the 4th
quarter, up only 2.3 percent from the 4th quarter of 2018 (compared
to 2.5 percent and 2.8 percent in 2018 and 2017, respectively).
What about reliance on the household sector? On the one hand, personal
consumption expenditures contributed 1.2 percentage points of the 2.1 percent
top-line growth, and year-over-year growth rates continue to exceed 2.5 percent
since 2017. On the other hand, growth in goods spending weakened to just 1.2
percent (annual rate), and growth in personal income has slowed by over a
percentage point.
What about the slump in investment? On the one hand, residential investment
contributed to GDP growth for the second consecutive quarter, adding 0.21
percentage points. On the other hand, non-residential structures continued to
slump (-10.1 percent) and were joined by equipment investment (-2.9 percent).
What about special factors? On the one hand, the large inventory swing that
subtracted 1.1 percentage points from growth is unlikely to be repeated. On the
other hand, the trade war crushed imports and added over 1.3 percentage points
to growth. Oh, and a bonus third hand: the real impact of Boeing shutting down
the 737 Max will appear in the 1st quarter of 2020.
Is there a bottom line to all this? Yes: The U.S. economy has proved resilient
enough to survive a lot of these “other hands.” And there is every reason to
believe that trade policy will reverse course and join regulatory, tax, and
monetary policy in supporting faster growth in the future.
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