WASHINGTON (Reuters) - U.S. economic growth slowed less than previously estimated in the fourth quarter as the biggest gain in consumer spending in three years partially offset the drag from a jump in imports.

A shopper is seen in a Target store in the Brooklyn borough of New York, U.S., November 14, 2017. REUTERS/Brendan McDermid

Gross domestic product expanded at a 2.9 percent annual rate in the final three months of 2017, instead of the previously reported 2.5 percent, the Commerce Department said in its third estimate for the quarter on Wednesday. That was a slight moderation from the third quarter’s brisk 3.2 percent pace.

The upward revision to the fourth-quarter growth estimate also reflected less inventory reduction than previously reported. Economists polled by Reuters had expected that fourth-quarter GDP growth would be revised up to a 2.7 percent rate.

There are signs that economic activity slowed further in the first quarter, with retail sales falling in February for a third straight month. Housing data have been generally weak and the trade deficit hit a more than nine-year high in January.

The Atlanta Federal Reserve is currently forecasting the economy growing at a 1.8 percent rate in the January-March period. First-quarter GDP growth tends to be weak because of a seasonal quirk.

Still, analysts believe the economy will hit the Trump administration’s 3 percent annual growth target this year, driven by the $1.5 trillion tax cut package and an increase in government spending.

That could keep the door open to slightly more aggressive interest rate increases from the Federal Reserve this year. The U.S. central bank raised rates last week and forecast at least two more hikes for 2018. The Fed also lifted its economic growth projections for this year and 2019.

“Tax cuts and stronger government spending will boost average GDP growth to 2.9 percent in 2018,” said Gregory Daco, chief U.S. economist at Oxford Economics in New York. “We forecast this environment will lead the Fed to raise interest rates four times this year.”

There are worries the Trump administration’s adoption of protectionist trade measures could sour business sentiment and hurt spending on capital goods.

President Donald Trump last week signed a memorandum targeting up to $60 billion in Chinese goods with tariffs over what his administration says is misappropriation of U.S. intellectual property. Trump also has imposed tariffs on steel and aluminum imports.

The economy grew 2.3 percent in 2017, an acceleration from the 1.5 percent logged in 2016.

U.S. financial markets were little moved by Wednesday’s data. Stocks on Wall Street were trading mostly higher, while prices of U.S. Treasuries edged up. The dollar .DXY firmed against a basket of currencies, pushing further away from a five-week low in the prior session.


The government also reported on Wednesday that after-tax corporate profits increased at a 1.7 percent rate in the fourth quarter after rising at a 5.7 percent pace

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