This is the biggest takeaway from the US GDP report

The GDP report today showed middling growth of an annualized 1.9% in the US in the last quarter of 2016. That’s not gangbusters, but it’s not bad either. The thing to look at is consumption, because that shows the consumer chugging along. While this revision showed the overall level of GDP growth unchanged, the consumption number was revised way up to 3.0%.

Why does this matter? Two things: first, as long as wage growth holds up, the economy well continue to do pretty well if consumption is growing at a 3% annualized pace. Second, if consumption indeed does continue to grow this fast, we should be worried about what it would mean for trade policy. The US goods trade deficit widened sharply in January to $69.2 billion, with exports actually falling 0.3% and imports rising 2.3%. That is a trend sure to attract the Ire of Donald Trump.

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