The U.S. economy grew at an annual rate of 2.6 percent during the fourth quarter of 2018, according to www.abc.org. Year-over-year gross domestic product (GDP) growth was 3.1 percent, and average growth for 2018 was 2.9 percent.
"Today's GDP report confirms continued strong investment in nonresidential segments in America," says ABC Chief Economist Anirban Basu. "Separately, construction spending data show significant expenditures on the construction of data centers, hotel rooms, theme parks and fulfillment centers. These data also indicate stepped-up public construction spending in categories such as transportation, education and water systems. Despite that, today's GDP release indicated that investment in nonresidential structures actually declined 4.2 percent on an annualized basis during last year's fourth quarter. Despite that setback, this form of investment was up by 5 percent for the entirety of 2018.
"Undoubtedly, some attention will be given to the fact that the U.S. economy expanded by just shy of 3 percent in 2018," Basu continues. "Unless that figure is revised upward in subsequent releases, it will mean that America has failed to reach the 3 percent annual threshold since 2005. But while much attention will be given to a perceived shortfall in growth, the fourth quarter figure of 2.6 percent signifies that the U.S. economy entered this year with substantial momentum. Were it not for a weak residential construction sector, 3 percent growth would have been attained. Moreover, the data indicate strength in disposable income growth and in business investment."
Basu expects the U.S. economy to soften during the upcoming year.
"It is quite likely that the U.S. economy will expand at around 2 percent this year," Basu says. "Though interest rates remain low and hiring is still brisk, a number of leading indicators suggest the nation's economy will soften somewhat during the quarters ahead, which can be partly attributed to a weakening global economy. This won't unduly impact nonresidential construction activity, however, since the pace of activity in this segment tends to lag the overall economy, and strong nonresidential construction spending is expected in 2019. Finally, ABC's Construction Backlog Indicator continues to reflect strong demand for contractors, who have nearly nine months of work lined up."
