U.S. GDP slows to 0.7% for the fourth quarter of 2015
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.
Gross domestic product increased at a 0.7 percent annual rate, the Commerce Department said on Friday, also as lower oil prices continued to undermine investment by energy firms and unseasonably mild weather cut into consumer spending on utilities and apparel.
The growth pace was in line with economists’ expectations and followed a 2 percent rate in the third quarter. The economy grew 2.4 percent in 2015 after a similar expansion in 2014.
But some of the impediments to growth – inventories and mild temperatures – are temporary and the economy is expected to snap back in the first quarter. Excluding inventories and trade, the economy grew at a 1.6 percent pace.
Nevertheless, the GDP report could spark a fresh wave of selling on the stock market, which has been roiled by fears of anemic growth in both the United States and China.
The Federal Reserve on Wednesday acknowledged that growth “slowed late last year,” but also noted that “labor market conditions improved further.” The Fed, the U.S. central bank, raised interest rates in December for the first time since June 2006. Though the Fed has not ruled out another hike in March, financial markets volatility could see that delayed until June.
SMALL INVENTORY BUILD
In the fourth quarter, businesses accumulated $68.6 billion worth of inventory. While that is down from $85.5 billion in the third quarter, it 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 percentage point 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 percent rate. That marked a step-down from the 3.0 percent pace notched in the third quarter.
Unusually mild weather hurt sales of winter apparel in December and undermined demand for heating through the quarter.
