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GDP: Expectations Versus Reality

The good news is that we’re not in recession territory. The bad news is that economic growth is slowing down, dramatically. Q4 GDP is 2.6%, which is down from 4.2% in Q2 and 3.4% in Q3. Thanks to the Trump tax cuts and a jump in federal spending, 2018 was an exceptional year that will be hard to equal in 2019 and beyond. The tax cuts gave the economy a big boost, but it was short lived. It did, however, increased the deficit by $779 billion in 2018. And here is the thing about GDP: once you make a per-capita adjustment, the GDP number is actually lower. Q4 would be 1.80%. For some historical perspective see the chart below. The market had it right. There was reason to worry because economic expansion is heavily dependent on the Fed.

GDP

One comment on “GDP: Expectations Versus Reality

  1. Flor Delsol says:

    I couldn’t refrain from commenting. Perfectly written!

    Like

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