U.S. consumers opening wallets
WASHINGTON The U.S. economy expanded at 2.2 per cent annualized pace in the fourth quarter, led by the biggest gain in consumer spending in eight years.
The revised increase in gross domestic product, the value of all goods and services produced, matched the Commerce Department’s previous estimate, according to figures issued Friday in Washington. The report also showed corporate profits dropped in the last three months of the year, capping the worst annual performance since the recession.
The rate of economic growth will prove hard to replicate this quarter as harsh winter weather, a stronger dollar, a port slowdown and a global oil glut translate into disappointing spending on the part of consumers and businesses. Job growth — one of the few economic indicators that charged ahead unabated in the first quarter — will probably help support demand in the world’s biggest economy for much of the year.
There’s “a little bit of a nice gloss on the fourth quarter,” thanks to “very strong” consumer spending, Michael Feroli, chief U.S. economist at JPMorgan Securities LLC in New York, said before the report. As for the outlook this quarter, “I don’t think it’s as dire as some of the February data might indicate.”
The median forecast of 83 economists surveyed by Bloomberg called for growth of 2.4 per cent. Projections ranged from 1.8 per cent to 2.7 per cent. This is the final of three estimates for the quarter.
An upward revision to consumer spending and exports was mostly offset by smaller gains in inventories, the report showed.
For all of 2014, the U.S. economy grew 2.4 per cent from the year before, the most since 2010 and following a 2.2 per cent advance in 2013.
Household consumption, which accounts for almost 70 per cent of the economy, was revised up to show a 4.4 per cent gain at an annualized rate in the fourth quarter, the most since the first three months of 2006. It was previously estimated at 4.2 per cent. The update reflected bigger outlays on health care.
For all of 2014, consumer spending rose 2.5 per cent, the most since 2006.
The pickup in purchases failed to boost companies’ bottom lines. The Commerce Department’s report also included data on fourthquarter corporate profits. Beforetax earnings fell 1.4 per cent after rising 3.1 per cent in the previous three months.
They decreased 0.2 per cent from the same time in 2013.
For all of 2014, corporate profits were down 0.8 per cent, the first decrease since 2008. The outlook for 2015 has dimmed with the jump in the dollar.
A stronger currency is more likely to “impact profits this quarter and through this year rather than happening almost in real time,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report.