US economy grew at a solid pace in the fourth quarter

US economy grew at a solid pace in the fourth quarter
Sofia Ordonez/CNNMONEY

US economic growth slowed slightly at the end of last year, but not nearly as much as feared by some economists.

The US gross domestic product, the broadest measure of the nation’s economy, grew at an annualized rate of 2.6% in the fourth quarter.

Although that’s slower than the previous three months, it’s faster than the same period a year earlier.

Some forecasts had been much lower. The Federal Reserve of Atlanta had forecast growth of only 1.8%. Economists surveyed by Thomson Reuters had forecast growth as slow as 1.4%.

Some economists worry that slowing economies elsewhere in the world, particularly in China and Europe, will drag down American economic growth. The US economy depends on trade with those countries. The rising trade tensions between the United States and some of its trading partners hurt the sales of several major US companies, including Apple and Caterpillar. New orders for many factories had slowed at the end of last year.

But with unemployment near a 50-year low, consumer spending was strong. And business investment was even stronger, rising by 6.2%. That helped to support overall growth.

The solid growth in the fourth quarter resulted in the economy posting 2.9% growth for the full year. That’s the best year of growth since 2015.

“That acceleration is no surprise given the size of the fiscal stimulus introduced early last year,” said Paul Ashworth, chief US economist for Capital Economics, talking about the reduced taxes, especially for many corporations.

But economists are still cautious about the pace of growth going forward.

Low unemployment is good for consumers, businesses have been having trouble finding the workers they need, which can slow the pace of growth.

The sugar rush from the tax cuts is expected to fade and higher interest rates could become a headwind. The Chinese and European economies could slow even more, dragging down US growth, especially with the uncertainty about what will happen when the UK leaves the European Union later this year.

“The first quarter won’t be this good,” said Ashworth. “We expect GDP growth to slow to 2.2% this year and only 1.2% in 2020.”