U.S. economy slows to 0.7% in fourth quarter as inventories, trade weigh.
Source: CNBC
U.S. economic growth braked sharply in the fourth quarter as businesses stepped up efforts to reduce an inventory glut and a strong dollar and tepid global demand weighed on exports. The nation's GDP increased at a 0.7% annual rate, the Commerce Department said on Friday. The fourth-quarter growth pace was in line with economists' expectations and followed a 2% in the third quarter. The economy grew 2.4% in 2015 after a similar expansion in 2014.
The report that showed a further cutback in investment by energy firms grappling with lower oil prices. Excluding inventories and trade, the economy grew at a 1.6% pace in the fourth quarter. In the fourth quarter, businesses accumulated $68.6 billion worth of inventory. The decline from $85.5 billion in the third quarter was a bit more than economists had expected, suggesting inventories could remain a drag on growth in the first quarter. The small inventory build subtracted 0.45% from the first estimate of fourth-quarter GDP growth.
Consumer spending, which accounts for more than two-thirds of U.S.economic activity, increased at a 2.2%. Though that was a step-down from the 3.0% pace notched in the third quarter, the gain was above economists' expectations. Income at the disposal of households after accounting for taxes and inflation increased 3.2% in the fourth quarter after rising 3.8% in the prior period. The savings rate rose to 5.4% from 5.2% in the third quarter.
The downturn in energy sector investment put more pressure on business spending on nonresidential structures. Spending on mining exploration, wells and shafts dropped at a 38.7% rate after plunging at a 47.0% pace in the third quarter. Investment in mining exploration, wells and shafts fell 35% in 2015, the largest drop since 1986.
Business spending on equipment overall contracted at a 2.5% rate last quarter after rising at a 9.9% pace in the third quarter. Investment in residential construction remained a bright spot, rising at a 8.1% rate.
Read more: http://www.cnbc.com/2016/01/29/us-q4-gdp.html
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