The U.S. economy lost momentum in the final three months of 2016, growing at a 1.9 percent annual rate, down from the prior quarter’s 3.5 percent pace. The biggest reason for the slowdown: the trade deficit.
After exports grew 10 percent in the third quarter, they fell 4.3 percent in the fourth quarter. At the same time, imports rose 8.3 percent, as a stronger dollar encouraged consumers and business to buy products from overseas. As a result, trade subtracted 1.7 percentage points from annualized growth in the fourth quarter, the biggest drag since 2010.
But demand remained solid. Consumer spending growth slowed just slightly in the fourth quarter, to 2.5 percent, while business investment rose a steady if unspectacular 2.4 percent, and investment in housing jumped 10.2 percent.