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Boosted by consumer spending, US economic growth revised higher in Q4

GDP increased at a 2.1% annualised rate instead of the previously reported 1.9% pace

Us Economic Growth

Reuters  |  Washington 

People cross Broadway with shopping bags in Manhattan, New York City, US
People cross Broadway with shopping bags in Manhattan, New York City, US

slowed less than previously reported in the fourth quarter as robust consumer spending spurred the largest increase in imports in two years.

Gross domestic product increased at a 2.1 per cent annualised rate instead of the previously reported 1.9 per cent pace, the Commerce Department said on Thursday in its third GDP estimate for the period. The grew at a 3.5 per cent rate in the third quarter.

The government also said that corporate profits after tax with inventory valuation and capital consumption adjustments increased at an annual rate of 2.3 per cent in the fourth quarter after rising at a 6.7 per cent pace in the previous three months.

Profits were held back by a $4.95 billion settlement between the US subsidiary of Volkswagen AG and the US federal and state governments for violation of environmental regulations.

Data on trade as well as consumer and construction spending suggest that economic growth moderated further at the start of 2017. The Atlanta Federal Reserve is forecasting GDP rising at a rate of 1.0 per cent in the first quarter.

With the labour market near full employment, the data likely understate the health of the . GDP tends to be weaker in the first quarter because of calculation issues the government has acknowledged and is trying to resolve.

A separate report from the labour Department on Thursday showed initial claims for state unemployment benefits fell 3,000 to a seasonally adjusted 258,000 for the week ended March 25.

Claims have now been below 300,000, a threshold associated with a healthy labour market for 108 straight weeks. That is the longest stretch since 1970 when the labour market was smaller.

The grew 1.6 per cent for all of 2016, its worst performance since 2011, after expanding 2.6 per cent in 2015.

Prices of US government debt fell after the data. US stock index futures pared losses, as did the US dollar against a basket of currencies.


The moderate economic expansion poses a challenge to President Donald Trump, who has vowed to boost annual growth to 4 per cent by slashing taxes, increasing infrastructure spending and cutting regulations. The Trump administration has offered few details on its economic policies.

Economists polled by Reuters had expected fourth-quarter GDP would be revised up to a 2.0 per cent rate.

Growth in consumer spending, which accounts for more than two-thirds of US economic activity, was revised up to a 3.5 per cent rate in the fourth quarter. It was previously reported to have risen at a 3.0 per cent rate.

Some of the increase in demand was satiated with imports, which increased at a 9.0 per cent rate. That was the biggest rise since the fourth quarter of 2014 and was an upward revision from the 8.5 per cent pace reported last month.

Exports declined more than previously estimated, leaving a trade deficit that subtracted 1.82 percentage point from GDP growth instead of the previously reported 1.70 percentage points.

There was an upward revision to inventory investment. Businesses accumulated inventories at a rate of $49.6 billion in the last quarter, instead of the previously reported $46.2 billion. Inventory investment added 1.01 percentage point to GDP growth, up from the 0.94 percentage point estimated last month.

Business investment was revised lower to reflect a more modest pace of spending on intellectual property, which increased at a 1.3 per cent rate instead of the previously estimated 4.5 per cent rate.

There were no revisions to spending on equipment. Investment in nonresidential structures was revised to show it falling at a less steep 1.9 per cent pace in the fourth quarter. It was previously reported to have declined at a 4.5 per cent rate.

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First Published: Fri, March 31 2017. 02:37 IST