U.S. economic growth slowed unexpectedly at the end of last year, providing a sharp contrast to the Trump administration's enthusiastic talk about the economy and putting fresh pressure on the Republican tax bill to deliver in a way few independent analysts say it can.
The economy expanded at an annualized rate of 2.6 percent from October through December, below the 3 percent many administration officials and outside economists had expected.
Altogether, the economy grew 2.3 percent last year, better than the year before, but short of what President Trump has been promising. The report on gross domestic product, a broad measure of economic activity, cut against the recent round of celebration by the president and his aides about the soaring stock market and U.S. companies delivering tax cut-inspired bonuses to their workers.
Just as the report came out, Trump was touting his economic success in a speech in Davos, Switzerland.
"After years of stagnation, the United States is once again experiencing strong economic growth," Trump said. "The world is witnessing the resurgence of a strong and prosperous America."
But economic growth in Trump's first year as president was the third best in the past five, and experts predicted that, even with the $1.5 trillion tax cut, it would prove difficult to achieve much more momentum.
The slowdown was surprising — the past two quarters had exceeded 3 percent growth — in part because so many other metrics of the economy's health had been bright recently, including the 4.1 percent unemployment rate and the stock market's seemingly unstoppable rise.
And 2.6 percent growth is not considered a bad tally, but it does underline how difficult it will be for the administration to match its lofty promises.
Republicans say the tax law, which passed on a party-line vote last December, will produce a surge in economic growth large enough to prevent the measure from adding to the federal deficit.
In December, Trump said he saw "no reason why we don't go to even 4, 5 or 6 percent." And while Trump may often employ hyperbole, National Economic Council Director Gary Cohn in December said growth would "easily" eclipse 4 percent in 2018 once the tax cuts took effect.
Independent economists also predict the cuts will goose the economy, at least in the short term, but not at rates anywhere near what the White House is promising. On Monday, the International Monetary Fund projected growth of 2.7 percent in 2018 — bumping up an earlier estimate of 2.3 percent thanks to the tax law.
Experts doubted that the tax cuts would unleash growth significantly higher than 3 percent, particularly in the long-term.
"The tax cuts look like a near-term boost to the economy, rather than a long-term structural change," said Satyam Panday, an economist at S&P Global, which has projected 2.8 percent growth for 2018.
Some Trump allies are revising their expectations.
"I've been saying 3.5 to 4 percent growth for the first half of 2018, but since this number is on the low side I'm going to downgrade my estimate for the first half of 2018" to 3.5 percent, said the Heritage Foundation's Stephen Moore, who helped Trump craft his tax plan during the presidential campaign and is close to the White House.
White House officials downplayed the disappointing numbers Friday, citing an uptick in imports that appeared to push down the overall number. Those imports were driven by one-time issues as companies rushed some decisions and waited on others before the new law took affect, said Kevin Hassett, chairman of the Council of Economic Advisers.
"The data right now look very consistent with the CEA view that the economy is growing at a rate that is going to be going into next year north of 3 percent," Hassett told Fox Business.
For now, the White House is dealing with an uncomfortable fact: The economy the president decried as "American carnage" under President Barack Obama is, by most indicators, strikingly similar to the one Trump presides over now.
Economic growth during Trump's first year in office bested Obama's last, when the economy grew 1.5 percent. But the economy grew more under Obama in 2015 and 2014, and it has grown every year since 2009.
Unemployment is low and inflation appears fully in check, while wages continue to creep upward and the stock market soars. And the economy added 2.1 million jobs in 2017, compared with 2.2 million in 2016.
The economy issue has offered relief to a White House struggling with poor polling numbers, the ongoing investigation into potential campaign collusion with Russia and the steady string of controversies and scandals that surround the commander in chief.
Whether that growth continues, however, will be influenced by many factors outside Trump's control. Businesses move in cycles of investment and consolidation while consumer confidence ebbs and flows. The global economy can help or hurt domestic performance. And many predict that the stock market is due for a downward correction as investors sell off stocks that they believe cannot climb any higher.
Trump's economy also faces challenges from the Federal Reserve, which is slowly unwinding the extraordinary efforts it undertook over the past decade to stimulate growth. The Fed dropped interest rates to historical lows, hoping to prompt businesses to borrow money to make new investments and hires. Now, the Fed is incrementally raising rates, hoping to ward off future inflation and preserve the tools it needs to address the next recession.
Those increases are expected to continue under Jerome H. Powell, the incoming Federal Reserve Board chair who was confirmed by the Senate earlier this week.
The federal Bureau of Economic Analysis provides the GDP figures, which are subject to revision as the agency collects more data. The agency tweaked its growth estimate for the third quarter of 2017 on Friday, now saying that the economy grew at an annualized rate of 3.2 percent in that span.
Last year's growth was held back by a particularly slow first quarter, when the economy expanded at an annualized rate of 1.2 percent, and there were bright spots in Friday's report.
"Domestic demand itself is the best we've seen since 2014," Panday said. "That bodes very well for 2018."