US GDP unrevised at 2.2% in fourth quarter
by Agency Staff,
2015-03-27 16:23:20.0
WASHINGTON — US economic growth cooled in the fourth quarter as previously estimated, with businesses throttling back on inventory and equipment investment but robust consumer spending limiting the slowdown in the pace of activity.
Gross domestic product (GDP) expanded at a 2.2% annual rate, unrevised from last month’s forecast, the Commerce Department said on Friday in its third estimate. The economy grew at a 5% rate in the third quarter.
The government also reported that after-tax corporate profits fell at a 1.6% rate in the fourth quarter, as a strong dollar dented the earnings of multinational corporations.
After-tax profits increased at a 4.7% rate in the July-September period. For all of 2014, profits dropped 8.3%, the largest annual drop since 2008.
Slower economic growth together with benign inflation could prompt the US Federal Reserve to delay raising interest rates until later this year. The US central bank has kept its short-term lending rate near zero since December 2008.
Fed officials last week lowered their individual growth estimates for this year through 2017.
The moderate pace of expansion appears to have persisted through the first quarter.
The sturdy dollar, lingering weakness in Europe and Asia, harsh winter weather in the US and a now-settled labour dispute at the busy US West Coast ports put a damper on activity in the first two months of the year.
With temperatures rising, there are signs of some pick-up in activity.
But the dollar, which gained 7.8% against the currencies of the main US trading partners between June and December, will likely provide a challenge for domestic manufacturers.
First-quarter growth estimates range between a 0.9% and 1.4% rate.
Businesses accumulated $80bn worth of inventory in the fourth quarter, less than the $88.4bn the government had estimated last month.
As a result, inventories subtracted 0.10 percentage point from GDP growth in the fourth quarter. Restocking was previously reported to have added 0.1 percentage point to output.
The weak pace of restocking, however, removes the threat of an inventory overhang, giving businesses scope to place more orders for goods, which should help to stimulate manufacturing.
Business investment on equipment was revised to show it rising at a 0.6% rate instead of the previously reported 0.9% pace. The slower rate of expansion in equipment spending likely reflected the strong dollar and lower crude oil prices, which caused a drop in drilling and exploration activity.
But consumer spending, which accounts for more than two-thirds of US economic activity, increased at a 4.4% rate in the fourth quarter instead of the 4.2% pace reported last month. It was the fastest rate since the first quarter of 2006.
Consumer spending, however, moderated early in the first quarter as cold and snowy weather kept shoppers at home.
Households also appear to have opted to save the bulk of their savings from lower petrol prices.
Despite slower global demand, export growth was revised higher. But with consumer spending so strong, more imports than previously estimated flowed into the country, resulting in a trade deficit that weighed on GDP growth.
Trade lopped off 1.03 percentage points instead of the 1.15 points reported last month.
Residential construction spending in the fourth quarter was revised up, while government spending was a touch weaker than previously reported.
Reuters
Picture: THINKSTOCK
WASHINGTON — US economic growth cooled in the fourth quarter as previously estimated, with businesses throttling back on inventory and equipment investment but robust consumer spending limiting the slowdown in the pace of activity.
Gross domestic product (GDP) expanded at a 2.2% annual rate, unrevised from last month’s forecast, the Commerce Department said on Friday in its third estimate. The economy grew at a 5% rate in the third quarter.
The government also reported that after-tax corporate profits fell at a 1.6% rate in the fourth quarter, as a strong dollar dented the earnings of multinational corporations.
After-tax profits increased at a 4.7% rate in the July-September period. For all of 2014, profits dropped 8.3%, the largest annual drop since 2008.
Slower economic growth together with benign inflation could prompt the US Federal Reserve to delay raising interest rates until later this year. The US central bank has kept its short-term lending rate near zero since December 2008.
Fed officials last week lowered their individual growth estimates for this year through 2017.
The moderate pace of expansion appears to have persisted through the first quarter.
The sturdy dollar, lingering weakness in Europe and Asia, harsh winter weather in the US and a now-settled labour dispute at the busy US West Coast ports put a damper on activity in the first two months of the year.
With temperatures rising, there are signs of some pick-up in activity.
But the dollar, which gained 7.8% against the currencies of the main US trading partners between June and December, will likely provide a challenge for domestic manufacturers.
First-quarter growth estimates range between a 0.9% and 1.4% rate.
Businesses accumulated $80bn worth of inventory in the fourth quarter, less than the $88.4bn the government had estimated last month.
As a result, inventories subtracted 0.10 percentage point from GDP growth in the fourth quarter. Restocking was previously reported to have added 0.1 percentage point to output.
The weak pace of restocking, however, removes the threat of an inventory overhang, giving businesses scope to place more orders for goods, which should help to stimulate manufacturing.
Business investment on equipment was revised to show it rising at a 0.6% rate instead of the previously reported 0.9% pace. The slower rate of expansion in equipment spending likely reflected the strong dollar and lower crude oil prices, which caused a drop in drilling and exploration activity.
But consumer spending, which accounts for more than two-thirds of US economic activity, increased at a 4.4% rate in the fourth quarter instead of the 4.2% pace reported last month. It was the fastest rate since the first quarter of 2006.
Consumer spending, however, moderated early in the first quarter as cold and snowy weather kept shoppers at home.
Households also appear to have opted to save the bulk of their savings from lower petrol prices.
Despite slower global demand, export growth was revised higher. But with consumer spending so strong, more imports than previously estimated flowed into the country, resulting in a trade deficit that weighed on GDP growth.
Trade lopped off 1.03 percentage points instead of the 1.15 points reported last month.
Residential construction spending in the fourth quarter was revised up, while government spending was a touch weaker than previously reported.
Reuters
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