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US economy grew 2.3% in 2019, durable goods solid in January

A drop in new transportation orders as Boeing grapples with the worldwide grounding of the 737 MAX fueled the decline in durable good demand in January, which was nonetheless not as bad as feared (AFP Photo/David Ryder)

Washington (AFP) - US economic growth was unrevised at 2.3 percent in 2019, while orders for American-made manufactured goods started the year on a solid note, according to government data released Thursday.

The revised growth estimate was better than many countries in Europe but below President Donald Trump's goal of 3.0 percent, and its comes as fear of widespread economic disruption rises due to the outbreak of coronavirus.

It was also a decrease from the 2.9 expansion in 2018, thanks to uncertainty over Trump's trade confrontation with China, which reduced exports and raised costs for inputs.

Consumers however remained upbeat and continued to spend and buy homes, which offset weaker business investment along with government spending.

In the new data, its second estimate on last year's growth, the Commerce Department also showed gross domestic product for the final three months of 2019 expanded by 2.1 percent, while many economists had expected a modest upward revision.

Analysts at Oxford Economics said that "gives the optical illusion of an economy chugging along" at the end of the 2019, but the details "paint a softer picture ahead of the coronavirus outbreak" with the apparent strength coming largely from an collapse in imports.

The report also revised down a key inflation measure to 1.3 percent from 1.6 percent in the initial estimate published in January, taking it further below the Federal Reserve's target of 2.0 percent.

A separate report from the US Census Bureau showed new orders for durable goods fell to 0.2 percent, seasonally adjusted, in January, rather than the sharp decline economists had expected. It was still big a drop from the revised 2.9 percent surge in December.

The decrease was driven by orders for transportation equipment, which fell by 2.2 percent as Boeing continues to deal with the fallout from the worldwide grounding of its 737 MAX model.

But excluding defense, new orders went up by 3.6 percent, powered by a 346.2 percent increase in new orders for non-defense aircraft, which Ian Shepherdson of Pantheon Macroeconomics described as a fluke.

"This might seem odd, given that Boeing reported zero orders in January," Shepherdson said, but "they were less terrible, compared to seasonal norms, than in December."

With transportation excluded, durable goods orders increased 0.9 percent, which Oxford Economics said "marks a good start to the year."

However, the firm cautioned that the result also shows businesses are not ready to start spending heavily yet.

"There isn't much reason to suggest business investment will turn a corner this year, especially now with the global spread of COVID-19," they wrote in a note.