Gross domestic product in the U.S. was up 1.9% in Q4 versus a year earlier according to the Commerce department Friday. This was just below the 2.1% average growth since 2010.
By way of comparison, during the 7 years before the last recession GDP averaged 2.4%. During the 7 years up to and including 2000, GDP was 4%. President Donald Trump wants to improve greatly on recent numbers. The question is, “How?”
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Gross domestic product has 4 components – consumption, investment, government purchases and trade. So far consumption has been the strongest driver but most experts doubt it can continue to bear the full weight of GDP. Trade may be a negative factor – especially if Trump’s plan to remove the U.S. from major trade deals comes to pass.
This leaves two components - investment by business and investment by government, mostly in the form of infrastructure. Trump’s promises of lower taxes and reduced regulations could provide a boost to business investment. Likewise, his promise to enact a bold infrastructure spending bill could do much to help raise GDP.
Experts Are Cautious
Many economists believe it will be some time for the country sees benefit from any positive measures including business investment and infrastructure spending. The majority predict GDP growth of about 2% in 2017. Any significant boost, they say, will not come until 2018.
America’s trade deficit is a major reason for skepticism. The trade deficit is so important the economy would have grown more than 3% if the grade deficit would have simply remained unchanged.
Some Good News
Meanwhile consumer spending was up 2.5%, much of that based on purchases of big-ticket items like cars and computers. In fact, spending on durable goods was up 11%.
Corporations beefed up overall spending including the first increase in equipment buys in 5 quarters. Builders invested in new housing by more than 10%, the first advance in 3 quarters.
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Investors trying to balance their optimism with understandable pessimism, not to mention uncertainty about a new administration may want to consider some defensive consumer stocks that pay a dividend and show less dependence on market highs and lows.
Kraft Heinz (NASDAQ:KHCB), makers of Oscar Mayer, Heinz, Planters, Velveeta, Philadelphia, Lunchables, Maxwell House, Capri Sun, Ore-Ida, Kool-Aid and Jell-O, sells that huge food portfolio in 31 countries. While neither the stock nor the dividend is expected to grow substantially in 2017, it is expected to be a steady earner.
Reynolds American (:RAIN/A) tobacco owns Newport, Camel, Pall Mall and Doral, as well as Grizzly and Kodiak snuff. RAI, which pays a reliable $0.46 dividend each quarter has shown revenue increases each quarter as well. The company has even been showing growth.
Two more steady dividend payers include Snyder’s-Lance (:LNCEN/A) and Sysco (NYSE:SYYC). Snyder’s sells packaged snacks, something consumers continue to buy in mass quantities. The stock pays a steady $0.16 quarterly dividend. Sysco sells frozen foods, canned foods, dry foods, fresh meat, seafood and dairy. In other words, it’s a grocery store in a single stock. Currently Sysco pays a dividend and even offers growth – though analysts don’t expect the growth trend to continue.