The new report on economic growth in the fourth quarter – covering October, November, and December – was released this morning, and overall the figures aren’t bad. It’s worth appreciating, however, why they’re not even better.
The U.S. economy grew at a 3.2% annual pace in the fourth quarter, fueled by the biggest rise in consumer spending in three years and a snapback in business investment. Strong net exports also boosted growth, the Commerce Department said Thursday. Economists polled by MarketWatch had forecast a 3.3% gain in gross domestic product. […]Consumer spending jumped 3.3% in the fourth quarter, the best performance since 2010. Business investment also rebounded - companies raised spending on equipment by 6.9% after a measly 0.2% increase in the third quarter.
Note, these preliminary figures, which will be revised twice more in the coming months, come on the heels of 4.1% GDP growth in the third quarter. The back-to-back growth was the best seen in the U.S. in two years.
Overall for the calendar year, the domestic economy grew at just 1.9% – down from 2.8% in 2012 – but this was largely the result of a sluggish start. The second half of 2013 saw growth of 3.65%, which will hopefully create some momentum for this year.
But it’s important to recognize why the latest figures aren’t even better.
The congressional Republicans’ government shutdown, for example, shaved about 0.3% from the overall total. That’s a difference, in other words, between 3.2% growth and 3.5% growth. It’s still not clear exactly why GOP lawmakers did this, or what they hoped to accomplish, but there’s evidence now that the gambit took a toll on the economy.
What’s more, Daniel Gross noted that the report found that spending cuts from Washington shaved about one full percentage point from the GDP. What could have been the second strongest economic growth in the last five years was stunted by spending cuts demanded by congressional Republicans.
And yet, GOP lawmakers continue to insist that it’s the White House’s policies that are standing in the way of a more robust economy.
As for the image above, the chart shows GDP numbers by quarter since the Great Recession began. The red columns show the economy under the Bush administration; the blue columns show the economy under the Obama administration.