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The US economy ended the year on a stronger footing than expected, providing some reassurance as the global outlook falters.
Expansion was unexpectedly revised up to a 1 per cent annualised pace in the fourth quarter from 0.7 per cent, the Commerce Department said on Friday in its second estimate of how the economy performed. A downward revision to 0.4 per cent had been forecast.
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A robust jobs market and still rising house prices are providing the ballast for an economy that is facing weaker growth overseas, a sharp contraction in its manufacturing sector and retrenchment in the once booming oil industry.
The bulk of the surprise revision was down to companies accumulating stockpiles at a faster pace than estimated in the reading – a typically powerful variable in revisions.
The resilience of household spending has proved a bright spot for the economy in recent quarters, but it was revised to a 2 per cent from 2.2 per cent.
Analysts expect the economy’s tailwinds to further reassert themselves this quarter, pushing expansion to a 2 per cent pace, according to the latest survey from Bloomberg.
The dollar strengthened against the common currency and the yen after data showed the US economy capped 2015 on stronger footing than initially thought.
The world’s most important economy expanded at an annualised rate of one per cent in the fourth quarter of 2015, up from a previous estimate of 0.7 per cent, and higher than the 0.4 per cent economists expected.
The data, while backward-looking, bolster the argument that the economy may be able to better withstand a slowdown in the manufacturing and energy sectors than some had feared.
That could give the Federal Reserve the ability to continue tightening monetary policy this year even as other central banks, such as the European Central Bank and Bank of Japan, loosen policy in a bid to spur economic growth.
About 15 minutes after the GDP report, the euro fell by 0.3 per cent against the dollar to 1.0982, while the greenback rose 0.3 per cent against the yen to 113.32.
