US sees growth in Q4 revised to slightly lower 6.9%
WASHINGTON – The U.S. economy ended 2021 by expanding at a healthy 6.9% annual pace from October through December, the government reported Wednesday, a slight downgrade from its previous estimates.
For all of 2021, the nation’s gross domestic product – its total output of goods and services – jumped by 5.7%, the fastest calendar-year growth since a 7.2% surge in 1984 in the aftermath of a brutal recession.
Previously, the government estimated growth in last year’s fourth quarter was 7%. The small downgrade reflected a smaller increase in consumer spending and fewer exports, the Commerce Department said.
Looking ahead, however, growth is likely to slow sharply this year, particularly in the first three months 2022. Higher inflation will likely weigh on consumer spending as Americans take a dimmer view of the economy. Home sales have fallen as the Federal Reserve has started pushing up borrowing costs, leading to a sharp increase in mortgage rates. Exports may weaken as overseas economies are disrupted by Russia’s invasion of Ukraine.
For the January-March quarter of this year, the biggest drag will be a sharp reduction in the amount of goods businesses restock in their warehouses. In last year’s fourth quarter, companies engaged in a huge buildup of inventories, in an effort to get ahead of supply chain problems for the winter holidays.
That inventory restocking added as much as 5 percentage points to fourth quarter growth, a boost that wasn’t repeated in the first three months of this year. And solid consumer spending likely pulled in more imports in the first quarter, economists forecast, while a stronger dollar and slower growth overseas reduced U.S. exports. The combination should also weaken the economy in the first quarter.
Economists forecast that growth could fall to as low as 0.5% in the first three months of the year and may even slip into negative territory.