Most of the strength in revision came from upward boost in consumer spending
By Martin Crutsinger
AP Economics Writer
WASHINGTON (AP) — The U.S. economy grew at a slightly faster rate in the fourth quarter than previously estimated, boosted by stronger consumer spending. Consumers may be providing more lift to the economy in the current January-March period.
The Commerce Department said Friday that the economy grew at a modest 1.4 percent annual rate in the October-December period. That was better than the 1 percent growth rate estimated a month ago but still below the 2 percent annual growth for the July-September quarter.
Most of the strength in the revision for last quarter came from an upward boost to consumer spending, particularly involving recreation. Exports also were not as weak as previously thought.
The estimated growth of the U.S. gross domestic product — the nation’s total output of goods and services — was the government’s third and final look at GDP for the fourth quarter.
Friday’s report also contained a potentially worrisome sign — a weak first estimate of corporate profits. It showed that pretax profits fell 7.8 percent in the fourth quarter after a 1.6 percent drop in the third quarter. Fourth quarter profits were also down 11.5 percent from a year earlier — the steepest annual drop since 30.8 percent plunge in the fourth quarter of 2008 at the depths of the financial crisis.
On the other hand, consumer spending, which accounts for 70 percent of economic activity, grew at an annual rate of 2.4 percent in the fourth quarter, faster than the 2 percent growth estimated a month ago. Many economists saw this upgrade as a welcome sign that spending should remain strong, helped by solid employment gains this year.
Also helping boost growth was a slightly smaller drag from the nation’s trade deficit: The deficit widened in the fourth quarter but not as much as previously thought. Exports fell at a 2 percent annual rate, not the 2.7 percent decline estimated a month ago. Trade subtracted 0.14 percentage point from growth in the fourth quarter, less than the 0.25 percentage point previously estimated.
A slowdown in stockpiling by businesses reduced growth by 0.22 percentage point, slightly more than the 0.14 percentage point drag previously estimated.
Many economists think growth as measured by the gross domestic product is accelerating in the current quarter to a 2 percent annual rate. But some analysts have been downgrading their estimates of late, reflecting some weaker-than-expected economic data.
This year, continued strong gains in hiring could boost household incomes and support solid increases in consumer spending.
This month, the Federal Reserve left its key policy rate unchanged after having raised it from a record low in December. Fed officials also scaled back their expectations for the number of rate hikes this year from four to two.
Analysts have forecast that for 2016 as a whole, the economy will grow around 2 percent.
