Final reading on US Q4 GDP is up 2.9%, vs 2.7% growth expected

Matthew Busch | Bloomberg | Getty Images

An employee inspects a component for hybrid electric vehicle motors at the Toshiba International manufacturing facility in Houston, Texas.

The government said while provisions of the income tax overhaul that came into effect in January had no effect on corporate profits for current production, they had impacted on net cash flow in the fourth quarter.

An alternate measure of growth, gross domestic income, rose at a 0.9 percent rate in the October-December period. GDI expanded at a 2.4 percent rate in the third quarter.

The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, increased at a 1.9 percent rate in the fourth quarter. That followed a 2.8 percent rate of increase in the prior period.

There are signs that economic activity slowed further in the first quarter, with retail sales falling in February for a third straight month. Housing data have been generally weak and the trade deficit hit a more than nine-year high in January.

Still, analysts believe the economy will hit the Trump administration’s 3 percent annual growth target this year, driven by a $1.5 trillion income tax cut package and a planned increase in government spending.

That could keep the door open to slightly more aggressive interest rate increases from the Federal Reserve this year. The U.S. central bank raised rates last week and forecast at least two more hikes for 2018. The Fed lifted its economic growth projections for this year and 2019.

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