Updated at 11:33 a.m. ET
The U.S. economy expanded at a solid 2.6 percent rate during the last three months of 2018, but growth was significantly lower than it had been earlier in the year, the government said Thursday.
For 2018 as a whole, the economy grew 2.9 percent, a touch below the Trump administration's projected target of 3 percent.
"The economy has passed the mountaintop losing some altitude during the final quarter of 2018, but it is not about to crash. To the contrary, the flight path ahead looks quite safe," economist Sung Won Sohn said.
The numbers for the fourth quarter, which were delayed for a month because of the government shutdown, were higher than many economists had predicted. They were boosted by a big increase in business investment spending, which went up at an annual rate of 6.2 percent.
Trump administration officials say the bigger-than-expected numbers are a sign the president's economic agenda is succeeding.
"President Donald Trump has unleashed American growth at a pace the experts thought was not possible, approaching 3% real GDP growth in 2018," Commerce Secretary Wilbur Ross said in a statement. "An America First agenda that prioritizes American jobs, American workers, and American industry instead of burdensome regulation and unfair trade deals has revitalized the American economy. America is back."
Economists were somewhat more restrained in their reaction.
"The U.S. economy wasn't so bad in the final months of last year after all. In fact, it looked pretty good overall," says Mark Hamrick, senior economic analyst at Bankrate.com.
Still, the numbers show a clear softening of growth over the year.
The economy expanded by a very strong 4.2 percent during the second quarter, which many economists attributed to the 2017 tax cuts.
But after that initial spike, growth slowed to a 3.4 percent pace in the third quarter and then continued to soften at the end of the year.
Many economists see growth continuing to soften in 2019, because of weakness in Europe and the waning benefits of the tax cuts. The Federal Reserve now expects 2.3 percent growth this year.
The slowing growth suggests that Fed officials can continue to exercise patience in deciding whether to raise interest rates.
ARI SHAPIRO, HOST:
Today the Commerce Department finally released economic growth numbers for the last three months of 2018. The numbers had been delayed because of the government shutdown. As NPR's Jim Zarroli reports, the numbers turned out to be better than a lot of people expected.
JIM ZARROLI, BYLINE: Economic forecasters began to get pretty gloomy late last year. Stocks were plummeting, and there were signs the economies of China and Europe were slowing. Today the Commerce Department said the U.S. economy grew by a very respectable 2.6 percent during the last quarter of the year. Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities.
JARED BERNSTEIN: I think we should be encouraged in the sense that if you were thinking a recession is right around the corner, it just doesn't seem to be the case.
ZARROLI: Throughout the quarter, businesses remained confident. They spent money on new equipment and software. The U.S. exported more. The growth rate for the year as a whole turned out to be around 3 percent, which was what the White House had projected. But the report also suggested the U.S. economy was losing steam as the year went on. During the first half of last year, the economy was enjoying the effects of the 2017 tax cut, as well as a big government spending bill. Both helped juice the economy, and growth peaked in the second quarter, Bernstein says.
BERNSTEIN: We enjoyed what will probably, ultimately, be a year and a half of above-trend growth because of stimulus from the tax cuts and government spending, both deficit finance.
ZARROLI: As 2018 dragged on, growth fell from 4.2 percent to 3.4 percent to 2.6 percent.
BERNSTEIN: That's important because it belies this claim that the tax cuts have permanently put us on a faster growth path.
ZARROLI: Now many economists expect growth to slow even further to 2 percent or less as the impact of the tax cut wanes. Ben Herzon is executive director at IHS Markit.
BEN HERZON: It does go a long way to explaining some of the strength in 2018. But that boost to growth that we're seeing is - that we had seen from that is probably going to fade.
ZARROLI: But today's report is a reminder that there's still plenty of strength left in the economy. Unemployment remains very low, and companies are still spending. The historic economic expansion that the U.S. has enjoyed for nearly a decade continues even if last year's spike is looking more and more like a sugar high. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.