Friday, January 30, 2015

U.S Economy Grew 2.6% in Fourth Quarter

Real GDP grew at a 2.6% seasonally adjusted annual rate according to the Bureau of Economic Analysis' preliminary estimate. GDP growth was weaker than the third quarter, but still signals a strong economy. Personal consumption expenditures (PCE) continued to drive growth, followed by an increase in private inventory investment. The deceleration in real GDP growth primarily reflected an upturn in imports, a downturn in federal government spending and decelerations in nonresidential fixed investment and exports.

PCE increased 4.3% in the fourth quarter, contributing 2.9 percentage points to total GDP. In comparison, third quarter personal consumption growth was 3.2%, contributing 2.2 percentage points to total GDP. Inventories rebounded in the fourth quarter, contributing 0.8 percentage points to total GDP, after subtracting 0.03 percentage points from third quarter GDP.

Fixed investment grew 1.9%, a weak increase compared to 8.9% growth in the third quarter. Investment in equipment drove the drag, decreasing by 1.9% compared to an increase of 11.0% in the third quarter.

Exports increased just 2.8% compared with an increase of 4.5% in the third quarter as the economy is starting to feel the effects of the strong U.S. dollar. Increased imports further contributed to the decrease in net exports, growing 8.9% compared with a 0.9% decrease in the third quarter.

Federal government expenditures decreased 7.5% in contrast to an increase of 9.9% in the third quarter. The decline was primarily due to a 12.5% decrease in national defense spending, compared with an increase of 16% in the prior quarter.

Read the BEA report.

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