MW: U.S. fourth-quarter growth raised to 1%, but economy still soft
WASHINGTON (MarketWatch) — The annual pace of economic growth in the U.S. was marked up in the fourth quarter to 1% from 0.7%, mostly because of a bigger stockpiling of inventories.
Economists polled by MarketWatch had expected gross domestic product — the value of everything a nation produces — to be reduced to 0.4%.
The value of inventories, which adds to GDP, rose by $81.7 billion instead of $68.6 billion as initially reported, the Commerce Department said Friday.
The upward revision largely appeared to reflect a technical change in how inventories are calculated, but it might also suggest companies got stuck with more unsold goods than they expected.
Consumers boosted spending by 2% in the fourth quarter, but that was down from an initial 2.2% estimate and was much weaker compared with the spring and fall.
Businesses also spent less. Investment in equipment sank a revised 6.6% and outlays on structures such as drilling rigs and office space slipped 1.9%.
Crowded warehouse shelves might not bode well for first-quarter growth: firms could cut back on production early in the year to bring inventories into line.
Meanwhile, exports fell a steeper 2.7% instead of 2.5%, though trade was less of a drag on GDP because imports actually dropped 0.6%. Originally the government said imports increased 1.1%.
Inflation as measured by the PCE price index rose at a 0.4% annual rate in the fourth quarter, up from an earlier 0.1% estimate.
Looking ahead
The upward revision in fourth-quarter GDP had no effect on the economy’s performance in 2015 overall. The U.S. grew 2.4% for the second year in a row and failed to reach 3% for the 10th straight year.
The outlook for 2016 doesn’t look any better. Economists predict the U.S. will stick to its current rate of growth, held in check by a strong dollar, weak exports and slack business investment.
A strong dollar has made Americans goods more expensive for foreign customers. Demand for “Made in the U.S.” has also suffered because of slower global growth.
The drag they are having on the economy has been partly offset by higher consumer spending and a steadily recovering housing market. Americans boosted spending in 2015 by 3.1%, the most in a decade.
These countervailing trends were reflected in the government’s report card on the economy’s fourth-quarter performance.
Investment in new housing, for example, jumped 8% in the final three months of 2015. A surge in hiring and improved personal finances have given more Americans the means to buy a home.
Yet American consumers alone cannot push the economy to new heights. Unless businesses spend and invest more and the global climate improves, the U.S. is unlikely to grow any faster.
