This morning, the BEA released the GDP estimates for last year.  The headline figure is the advance estimate of GDP for the fourth quarter of 2017. Real GDP, inflation, unemployment and the labor force participation rate will be the main statistics that we will follow this semester. After taking into account two strong quarters and historically low unemployment rate, at 2.6%, real GDP growth seems underwhelming. But let's not jump into premature conclusions.

We can look more closely at the different components of GDP to better understand why the last quarter was actually pretty strong.  GDP is divided between spending on consumption (C), Investment (I), government spending (G), and net exports (NX).  Consumption increased by 3.8%, investment by 3.6%, government consumption expenditures and investment by 3.0%, exports by 3.9 percent.  What limited overall GDP growth is a 13.9% increase in imports.  This increase in imports is not harmful to the U.S. economy (we get more goods and services!).  But imports enter negatively in the National Income Accounts and so they reduce the estimate of GDP growth.  It is a little ironic that imports increased so much, given the Trump administration’s protectionist rhetoric.  In fact, this represents the largest import growth since the third quarter of 2010.