US revises fourth-quarter GDP down to 0.5% in third estimate
Official data cut US fourth-quarter growth to 0.5%, as softer business investment, inventories and consumer spending weighed on the final reading.
- The US fourth-quarter GDP growth was revised down to a 0.5% annualized rate in the Commerce Department's third and final estimate.
- This figure is a reduction from the previously reported 0.7% pace and the initial estimate of 1.4%, surprising economists who had expected no change.
- The downgrade was primarily attributed to weaker-than-expected business investment in areas like inventories and intellectual products.
- Consumer spending, which constitutes more than two-thirds of the US economy, was also revised lower, contributing to the reduced GDP figure.
Government data released on Thursday (April 9) pointed to a weaker finish to last year for the US economy than earlier estimated, after lower business investment, including inventory accumulation, led to a fresh downgrade in fourth-quarter growth, even as corporate profits jumped sharply.
In its third estimate, the Commerce Department’s Bureau of Economic Analysis said gross domestic product expanded at an annualised rate of 0.5% in the October-December quarter. That was down from the previously reported 0.7% pace, while the advance estimate had put growth at 1.4%.
Economists polled by Reuters had expected the fourth-quarter GDP figure to remain unrevised at 0.7%. Instead, the latest adjustment reflected weaker business spending on intellectual products as well as inventories.
Consumer spending, which makes up more than two-thirds of the US economy, was also revised lower, edging down to a 1.9% growth pace from the previously reported 2.0%.
The slowdown marked a sharp loss of momentum from the third quarter, when the economy had grown at a 4.4% rate. Last year’s government shutdown was cited as the main reason for that deceleration, though neither the third- nor fourth-quarter GDP readings were seen as giving a true picture of the economy’s underlying health.
A closely watched gauge of domestic demand, final sales to private domestic purchasers, rose at a 1.8% annualised pace in the fourth quarter. That measure strips out government, trade and inventories. It had previously been estimated at 1.9%, and had grown at a 2.9% pace in the July-September quarter.
Corporate America, however, showed stronger earnings momentum. Profits from current production increased at a rate of US$246.9 billion in the fourth quarter, accelerating from a US$175.6 billion growth pace in the third quarter.
On the income side, the economy expanded at a 2.6% rate in the fourth quarter. Gross domestic income had risen at a 3.5% pace in the July-September period.
The average of GDP and GDI, known as gross domestic output and often viewed as a better indicator of economic activity, grew at a 1.5% rate in the fourth quarter, down from 4.0% in the third quarter.
Although growth likely picked up in the first quarter, the US-Israeli war on Iran is now clouding the outlook for the US economy.
Reuters
