Not quite: GDP growth for 4Q 2017 disappoints at only 2.6 percent

It was just an arbitrary measure, of course. And 2.6 percent growth is respectable, if not much more than that. But it was looking good until this morning's initial report that we were going to hit three straight quarters of 3.0 percent GDP growth. We didn't, and apparently it had a lot to do with how much we bought from overseas sources toward the tail end of the year:

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Let's break this down a little

Let's break this down a little. When we buy a lot of imported goods, that's subtracted from the overall productivity level because we're shipping our dollars overseas in exchange for goods manufactured elsewhere. So we could have been just as productive as in a quarter with higher growth, but the GDP number is higher if we spend the dollars here. (I've never been one for "Buy American" campaigns and I'm not starting now. I think people should buy whatever they want. I'm just pointing out that this is part of the economic dynamic.) So in a sense, it's a measure of the economy's strength that increased consumer spending power resulted in the spike in imports. The left often argues that redistributive policies will result in more growth because low-income people who find themselves with extra cash usually spend it. True, but if they spend it on imported goods, that actually detracts from GDP. In another sense, though, the increase in imports is a measure of the state of American manufacturing - that U.S. companies are not yet operating at a level of efficiency or quality that allows them to compete as strongly as we'd like to see against foreign producers. People are going to buy according to their own best interests, so as long as they believe the foreign goods are a better value, that's what they'll buy. We'll see if the U.S. companies are able to take advantage of the coming year's tax savings to narrow that gap. By the way, do note how the Reuters excerpt above forecasts 3.0 percent growth in 2018, and cites three reasons: A weak dollar, rising oil prices and a stronger global economy. Those could all be factors, but doesn't the biggest tax reform in more than 30 years stand a pretty decent chance of making an impact as well? It seems to me this is likely to be the leading variable if the U.S. economy outpaces expectations in 2018. But it underperformed in the fourth quarter. And as we've often said, 3.0 percent is only a milestone on the way to the real goal or 4.0 percent or even 5.0 percent. Let's get after it.

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