The U.S. GDP increased 2.6% in the fourth quarter, down from 3.2% in the prior quarter, largely due to higher imports as consumer spending recorded the highest rise in three years. The paradoxical GDP tally masks the bullish overall economic sentiment buoyed by some sweeping policy changes by President Donald Trump.
The historic overhaul of the tax structure to reduce tax liabilities from 35% to 21% has boosted corporate earnings, stoked investments and trickled down to employees in some instances. In addition, Trump’s pledge to spend $1 trillion in infrastructure projects over a period of 10 years and regulatory rollbacks remained tailwinds. Improvements in the labor market and rise in wages have led to higher consumer spending. Additionally, three interest rate hikes in 2017 by the Fed, indicating inherent economic stability, have boosted investors’ confidence.