Data released on the US and UK economies on Friday shows the global recovery remains on track. However, while UK growth picked up slightly in the final three months of the year, US growth actually softened.
Preliminary estimates show the US economy grew at a 2.6% pace in the fourth quarter of 2017, a marked decline from the 3.2% rate of the prior quarter.
This should do little to cloud the global growth outlook, especially as investors can look forward to the prospect of $1.5tn worth of US tax cuts working their way through the system.
The generally upbeat global growth outlook was highlighted by the International Monetary Fund (IMF) this week.
Pointing to the likely stimulatory effects of US tax reforms, which includes sweeping tax cuts with a controversial reduction in the top rate of US corporate tax from 35% to 21%, the IMF raised its growth forecasts for both 2018 and 2019, to 3.9%.
It marks a 0.2% increase in the IMF´s global growth estimate for both years.
Economists remain constructive on the outlook for US growth.
“We continue to forecast 3% full-year growth for 2018. Strong domestic momentum will be boosted somewhat by tax cuts, while dollar softness puts the US in a great position to benefit from the global upturn in demand,” said James Knightley, chief economist at ING.
If anything, the decline in quarterly growth in the final three months of 2017 could help Donald Trump justify the tax cuts that he signed into law in December.
While the tax reforms were hotly contested by leading Democrats, the corporate tax cuts have proved overwhelmingly popular with corporate America.
One by one, US firms have been reporting a one-off hit to fourth quarter financial results on the back of the reforms, but at the same time raising their longer-term outlooks as they look forward to big tax savings over the coming quarters.
At 2.6%, fourth-quarter US growth disappointed economists´ median expectations of a 3% rate of expansion.
A slower pace of inventory accumulation was partly to blame. But there was also a big uptick in imports weighing on the overall growth figure, partly a reflection of strength in US consumer spending.
Perhaps though, the most important message in the US data released on Friday was on inflation.
There was a substantial rise in the core personal consumption expenditures index, which excludes volatile factors such as food and energy, jumping to 1.9% in the fourth quarter.
This was much higher than the 1.3% rate registered in the third quarter, and also ahead of economists´ expectations of a 1.7% reading.
It confirms the trend suggested by core US consumer prices released early this month, which suggested US consumer prices had risen at their fastest pace in almost a year in December, at 1.8% excluding food and energy, compared with 1.7% in November.