2018.01.2821:51:00UTC+00U.S. Economic Growth Slowed in the Fourth Quarter

U.S. economic growth slowed in the fourth quarter as the strongest pace of consumer spending in three years resulted in a surge in imports.

Gross domestic product grew at a 2.6 percent annual rate in the fourth quarter, compared to 3.2 percent in the third quarter, restrained by a widening trade deficit and only modest inventory accumulation, according to the Commerce Department.

The economy expanded 2.3 percent in 2017, a pick-up from the 1.5 percent marked in 2016.

Imports, which subtract from GDP growth, rose at their quickest rate in over seven years. Rising imports highlight the challenges that the Trump administration faces in its quest to lift annual GDP growth to 3.0 percent. They indicate that U.S. companies lack the capacity to meet buoyant domestic demand.

A measure of domestic demand grew at its fastest since the third quarter of 2014, underscoring the economy's strength.

Strong domestic demand is part of a synchronized global rebound that includes the euro zone and Asia.

Expansion, economists believe, will slow in 2019, with a recession likely in 2020, given low savings.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 3.8 percent rate in the fourth quarter. That was the quickest pace since the fourth quarter of 2014. It followed a 2.2 percent rate of growth in the July-September quarter.

The acceleration in consumer spending raised inflation. The Federal Reserve's preferred inflation gauge, the personal consumption expenditures (PCE) price index excluding food and energy, rose at a 1.9 percent rate. That was the quickest pace in more than a year and followed a 1.3 percent pace of increase in the third quarter.