Growing pain
Economy slows, but future’s bright
CONSUMERS PICKED up the slack for corporations in the fourth quarter.
The final tally for the nation’s gross domestic product in the October through December period showed the economy cooled to a 2.2% annual rate after a healthy 5% expansion in the previous quarter.
A 4.4% jump in consumer spending helped spur GDP — the value of all goods and services produced — as businesses pulled back on investments and inventory outlays.
It was the biggest gain in household expenditures since the first quarter of 2006, said the Commerce Department, whose third and final estimate on economic growth Friday was unrevised from last month’s forecast.
But the report also showed that corporate profits in the quarter slid 1.6%, thanks to a strong dollar dragging down earnings of international companies.
Profits overall in 2014 fell 8.3%, the biggest drop since 2008, when the economy was entering the worst downturn since the Great Depression.
The fourth-quarter results came ahead of what is widely expected to be an even bigger slowdown in the January to March period, due to a combination of severe winter weather in the U.S., softness in European and Asian economies, and a still-robust dollar.
Economic activity is projected to pick up in the second quarter, though, as the weather warms amid a strengthening labor market.
Separate data on Friday seemed to bear that out: Consumer confidence in March capped the best quarter in more than a decade on optimism that wages will rise, according to the University of Michigan’s consumer sentiment index.
Richard Curtin, director of the survey, called it a “good reading” that “certainly will support expanding consumer expenditures.”