The story of a globally synchronized momentum for increased economic growth was popular in the financial media for most of 2018 — that is until stocks suffered through their worst December since the Great Depression. Then analysts could only see negative trends in every international economic indicator. However, even though industrial numbers in Europe and China have weakened recently and the latest corporate earnings season may have been underwhelming overall, it is important to point out that the U.S. economy still remains on firm footing.
To emphasize this point, we can look at the economic data published by the Federal Government last week. On Thursday, the Commerce Department released its first reading on the country’s gross domestic product (GDP) during the last quarter of 2018 (Q4 2018). GDP measures the total value of all goods and services produced in a country during a specified time interval and remains the most popular gauge of overall economic health. Last Thursday’s report indicated that GDP increased at an annualized rate of 2.6% during the fourth quarter of 2018, beating market expectations of a 2.3% gain. Due to seasonal factors that influence economic output, quarterly GDP numbers can fail to capture true improvements in economic activity. Economists try to account for these patterns by adjusting the raw data to eliminate purely cyclical influences, but it can usually be more informative to look at GDP numbers over the span of one year. The chart below shows that with the latest information from the Commerce Department, the year-over-year percentage change in U.S. GDP was 3.1%. This was the tenth straight quarter that year-over-year GDP growth increased from the previous report. Gains in personal spending, private investment, and government spending all helped boost the latest number. The one negative takeaway from the report was the decline in net exports—a possible indication of the effect of the recent instability in the international economy and the political troubles over tariffs