US economic growth decelerated in the fourth quarter of 2014 and is likely to slow further in the first quarter of 2015 despite robust consumer spending, the US Commerce Department said on Friday, a media report said. The US economy expanded at an annual rate of 2.2 percent in the fourth quarter, unchanged from the second estimate released last month, the Department said in a report on the final estimate of the US gross domestic product (GDP), Xinhua reported.
That marked a large slowdown from a 4.6-percent growth in the second quarter and a five-percent growth in the third quarter, reflecting weak trade figures and government spending.
For the whole year of 2014, the US economy expanded 2.4 percent, slightly higher than that in 2013.
The fourth-quarter GDP growth stays unrevised as the larger-than-expected increases in exports and personal consumption expenditures largely offset a downward revision to private inventories, according to the report.
Personal consumption, which accounts for about 70 percent of overall economic activity, grew at an annual rate of of 4.4 percent in the fourth quarter, more strongly than previously estimated and the fastest pace since 2006. It added 2.98 percentage points to the overall economic growth in the quarter.
While exports grew at 4.5 percent in the fourth quarter, up from 3.2 percent in the previous estimate, trade deficit sliced off 1.03 percentage points of the fourth-quarter growth as imports rose sharply.
The change in private inventories also subtracted 0.1 percentage point from growth during the fourth quarter. It was previously reported to have added 0.12 percentage point to growth.
Non-residential fixed investment, or business investment, increased 4.7 percent during the October-December period, slightly slower than an earlier estimate of 4.8 percent and down from 8.9 percent in the third quarter, with spending on structures up 5.9 percent and investment on equipment up 0.6 percent.
The slowing business investment might reflect the strong US dollar and weak global demand. Dennis Lockhart, president of Federal Reserve Bank of Atlanta, said on Thursday that he is paying increasing attention to the impact of the strong dollar on the US economy as the central bank moves closer to raising interest rates.
Federal Reserve Chair Janet Yellen said on Friday that she expected an increase in the target range for the federal funds rate will be warranted later this year, and the pace for the rate hike will likely be gradual.
While Yellen expected the real GDP is likely to expand faster than its potential in coming quarters, she pointed out some headwinds for the economy: dollar appreciation appears to be restraining net exports; low oil prices are prompting a cutback in driving activity; and the recovery in residential construction remains subdued.
Many economists expect the economy to slow further in the first quarter.
“The economy faces headwinds from weak growth abroad – as well as the lingering effects of winter weather – that economists generally expect to reduce GDP growth temporarily in the first quarter of 2015,” Chairman of the White House Council of Economic Advisers Jason Furman said on Friday in a statement.
Morgan Stanley economists have downgraded their forecast for first-quarter growth to an annual rate of 0.9 percent from 1.2 percent of an earlier estimate, after the Commerce Department on Wednesday reported that orders for durable goods decreased 1.4 percent in February from a month ago.
The Commerce Department will release its first estimate of GDP in the first quarter of 2015 on April 29. Due to severe winter weather, the US economy contracted 2.1 percent in the first quarter of last year.