US growth in Q4 cools at 2.2%
Print Edition
US economic growth cooled in the fourth quarter as previously estimated, with businesses throttling back on inventory and equipment investment but robust consumer spending limiting the slowdown in the pace of activity.
Gross domestic product expanded at a 2.2 percent annual rate, unrevised from last month’s forecast, the Commerce Department said yesterday. The economy grew at a 5-percent rate in the third quarter.
The government also reported that after-tax corporate profits fell 1.6 percent in the fourth quarter, as a strong dollar dented the earnings of multinational corporations.
After-tax profits increased 4.7 percent in the July-September period. For all of 2014, profits fell 8.3 percent, the largest annual drop since 2008.
Slower economic growth together with benign inflation could prompt the Federal Reserve to delay raising interest rates until later this year. The US central bank has kept its short-term lending rate near zero since December 2008.
Fed officials last week cut their individual growth view for this year through 2017.
The moderate pace of growth appears to have persisted through the first quarter.
The sturdy dollar, lingering weakness in Europe and Asia, harsh winter weather in the US and a now-settled labor dispute at the busy West Coast ports dampened activity in first two months of the year. With temperatures rising, there are signs of some pick-up in activity.
But the dollar, which gained 7.8 percent against the currencies of the main US trading partners between June and December, will likely provide a challenge for domestic manufacturers.
First-quarter growth estimates range between a 0.9 percent and 1.4 percent.
Businesses accumulated US$80 billion worth of inventory in the fourth quarter, below the US$88.4 billion the government had estimated last month.
As a result, inventories subtracted 0.10 percentage point from GDP growth in the fourth quarter. Restocking was previously said to have added 0.1 percentage point to output.
The weak pace of restocking removes the threat of an inventory overhang, allowing firms to place more orders for goods.
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