Revised GDP Figures Bad News For Trump

The government says the US economy grew more slowly in 2018 than it previously estimated, downgrading its estimate from 3 percent to 2.5 percent.

President Trump had frequently boasted of the 3 percent growth figure as evidence that his policies invigorated the economy.

The Commerce Department lowered its estimate of growth from the fourth quarter of 2017 to the fourth quarter of 2018 mainly because businesses spent less on buildings, equipment and software than it had earlier thought.

The department made the change based on more comprehensive data as part of its annual revisions to gross domestic product, or GDP, the broadest measure of the nation's output of goods and services. The revisions cover the five years from 2014 through 2018.

Overall, the changes don't significantly alter the broader trajectory of the economy. Growth picked up in 2017 and 2018 after a sluggish 2016, spurred by stronger overseas growth, increased government spending and the Trump administration's tax cuts.

Still, the revisions mean that growth failed to cross the symbolic 3 percent threshold last year, which it hasn't done since 2005. Most economists point to slower population growth and sluggish increases in worker productivity as the primary reasons for the shortfall.

Trump had been quick to celebrate the government's first report on 2018 growth, released in February, which showed that the economy expanded 3.1 percent. The figure was subsequently revised lower to 3 percent.

In March, Trump boasted on Twitter that last year's figure was the "BEST NUMBER IN 14 YEARS!"

The revision to 2018 occurred in one of the two principal ways that the government calculates GDP. The standard measure, which compares average growth in one year with average growth in the previous year, shows that the economy grew 2.9 percent in 2018, the same as before the revisions.

But a second approach compares the size of the economy at the end of one year with its size at the end of the previous year.

This is the barometer that now shows 2.5 percent growth for 2018. This measure is preferred by some institutions and many economists because it is thought to present a clearer picture of what happened in a given year. The Trump administration's Council of Economic Advisers also prefers this method.

Economic growth in 2017 was revised higher, to 2.8 percent, according to the White House's preferred metric, from its previous level of 2.5 percent, partially offsetting last year's downgrade.

The government's revisions show that growth slowed more sharply in the fourth quarter of 2018 than previously thought — to just 1.1 percent at an annual rate, down from an earlier estimate of 2.2 percent. (AP)