GDP growth in the world's largest economy slowed to an annualized 2.3 percent from 2.9 percent in 2018, according to a preliminary estimate released by the Commerce Department. This is far from the 3% target set by Donald Trump.

In particular, the data shows that businesses have slowed their investments (+2.1% vs. +6.4%), because of the trade war that the US president has launched with China. The Boeing crisis also didn’t help, as well as the nosedive in construction activity in the energy sector that has been underway since the middle of last year.

Among the good news, household spending, the traditional engine of growth since it accounts for 70% of US GDP, remained steady (+2.6%) in 2019. The same trend was observed in government spending, which increased by 2.3% compared to 3.5% in 2018.

In a new report, Wells Fargo believes that the economy will decelerate further in Q1-2020. “Imports should bounce back after their tariff-induced distortion in Q4. In addition, the halt to Boeing’s production of the 737 MAX should also weigh on GDP growth in the first quarter of the year. However, the underlying fundamentals of the economy remain solid, in our view, and we do not look for an overall contraction in the economy this year. That said, a shock could potentially lead to some economic weakness in the United States, and we are watching the outbreak of the coronavirus closely to determine what effects, if any, it has for the U.S. economy.”

Source: U.S. Department of Commerce and Wells Fargo Securities