US Economic Growth Slows to 2.6% in Fourth QuarterBy clickingonUS Economic Growth Slows to 2.6% in Fourth Quarter
US Economic Growth Slows to 2.6% in Fourth Quarter
Wall Street Journal-38 minutes ago
U.S. economic growth retreated to a modest pace in the final months of 2014, underscoring challenges to an economic liftoff as troubles mount ...
US economy grew at 2.6 percent pace in fourth quarter of 2014
Blog-Washington Post (blog)-1 hour ago
Blog-Washington Post (blog)-1 hour ago
In-Depth-Livemint-4 hours ago
U.S. Economic Growth Slows to 2.6% in Fourth Quarter
GDP Underscores Obstacles Facing Recovery as Troubles Mount Abroad
U.S. economic growth retreated to a modest pace in the final months of 2014, underscoring challenges to an economic liftoff as troubles mount abroad.
Gross domestic product—the broadest measure of goods and services produced across the economy—expanded at a 2.6% annual rate in the fourth quarter, the Commerce Department said Friday. That was about half the pace of the third quarter’s 5% rate, which was the strongest in a decade.
Economists surveyed by The Wall Street Journal had expected fourth-quarter growth of 3.2%.
The report offered both hope and red flags for the world’s largest economy. Consumers, the main driver of U.S. growth, boosted spending at the fastest clip in almost nine years from October through December. Robust job growth and falling gasoline prices are lifting household confidence and spending power.
But businesses pulled back on investment in the fall, governments cut spending and export growth eased. Those obstacles could prevent the economic expansion from achieving long-awaited escape velocity in the near term.
While the main GDP gauge was weak, “you just had a two-quarter consumer [performance] that was literally the best since ‘05,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets. “To me, that is the overwhelming story here.”
Among the restraints to overall growth: The U.S. trade gap—driven by a pickup in American purchases of imported goods—skewed the main GDP figure. The headline GDP figure would have been a percentage point higher without the drag from trade.
Friday’s GDP figure is the government’s first estimate of fourth-quarter growth, and it will be revised twice in coming months as more data come in.
A sales assistant distributes shoes at Macy's during Black Friday sales in New York. Gross domestic product—the broadest measure of goods and services produced across the economy—expanded at a 2.6% annual rate in the fourth quarter. PHOTO: REUTERS
For 2014 as a whole, GDP expanded 2.4%, a shade higher than the average 2.2% growth of 2010-2013. By comparison, during the 1990s the economy grew an average 3.4% a year.
Many economists expect modest growth in the current quarter—perhaps a pace of between 2% and 3%—as turbulence in Europe and Asia threatens to hit manufacturers and cause businesses to clam up.
The report comes days after the Federal Reserve gave a largely upbeat assessment of the economy, which it said was expanding at a “solid pace.” The Fed maintained that it needed to see further signs of steady expansion before raising short-term interest rates.
But the slower-than-expected economic growth appears unlikely to worry Fed officials. “There is a lot of underlying momentum in the U.S.,” St. Louis Fed President James Bullardsaid on Bloomberg TV after the GDP report was released.
For now, consumers remain the key driver of growth in the world’s largest economy. Consumer spending—representing more than two-thirds of output in the U.S.—grew at a 4.3% pace in October through December, the fastest since early 2006.
But the other major components of output flashed new signs of weakness.
Business investment—reflecting spending on equipment, software and intellectual-property products—grew at a paltry 1.9% rate. Companies boosted spending on IP products and structures, such as plants and facilities, but cut spending on equipment. Some economists said the weak investment figures are likely linked to falling oil prices, with energy companies pulling back as their profit margins get squeezed.
Government spending declined at a 2.2% pace, reflecting a sharp drop in defense outlays.
Export growth continued to slow. Exports grew at a 2.8% rate, down from the third quarter’s 4.5% pace. That comes amid flagging growth in Asia and turbulence in Europe’s economies.
The housing market continues to underperform, though real estate construction picked up slightly from summer. Residential investment rose at a 4.1% pace in the fourth quarter, up from the third’s 3.2% rate.
The latest GDP figure partly reflected businesses rebuilding their inventories. Excluding the effect of company restocking, underlying demand in the economy showed signs of weakness. Real final sales of domestic product, a measure that excludes changes to inventories, grew at a 1.8% pace, down from the third quarter’s 5.0% rate.
Despite the economy’s expansion, inflation has been heading down, due largely to a sharp drop in oil prices since the summer as global supplies pile up and demand growth slows.
The price index for personal consumption expenditures—the Fed’s preferred inflation measure—fell at a 0.5% annual rate in the fourth quarter, compared with the 1.2% annualized increase during the third quarter and below the Fed’s 2% inflation target. Core prices—which exclude volatile food and energy components—were up 1.1% versus a 1.4% gain the prior quarter.
For a clearer copy to read click line above word button.
