The American economy expanded at a slower pace than initially thought in the fourth quarter of 2014, as less stockpiling by businesses and a slightly weaker trade balance weighed on growth.
Over all, economic output rose at an annual rate of 2.2 percent in October, November and December, below the initial estimate of 2.6 percent issued last month, according to government data released on Friday. The downward revision also represented a steep deceleration from the blistering 5 percent annual rate of growth reported in the third quarter of 2014.
Before the announcement, economists on Wall Street expected government statisticians to revise the estimated growth rate to 2 percent. The report released on Friday by the Commerce Department is the second of three estimates that are revised as more data comes in; the final estimate will be released in late March.
Much of the downward adjustment stemmed from slower additions to inventories by businesses than first estimated, shaving 0.7 percentage point from the headline number for growth even though other underlying components like demand from consumers remained healthy.
Real Economic Growth
Annual rate of change in the gross domestic product, based on quarterly figures adjusted for inflation and seasonal fluctuations.
4th quarter revised
Change at annual rate
To
From
+2.2%
+2.6
+6
%
+4
+2
0
–2
–4
’11
’12
’13
’14
The seemingly lackluster growth in the final three months of 2014 came even as hiring gained steam. Employers added an average of 324,000 workers a month in the fourth quarter, the best performance for the labor market in years. Hiring for all of 2014 rose at the fastest rate since 1999.
Besides shifting inventories, another factor holding down growth was a weaker trade balance, as rising imports lowered growth 0.2 percentage point. With the dollar gaining strength recently, and the euro’s value dropping sharply, imports may continue to rise in the months ahead, one new headwind for the economy in 2015.
On the other hand, while inventory changes are notoriously hard for economists to predict, one bright spot in terms of smaller inventory gain last quarter is that businesses may stockpile more in the current quarter, lifting growth in 2015. Most economists expect the pace of economic activity to pick up in the first quarter of 2015, with an average estimate of 2.5 percent growth for the period.
Final sales to domestic purchasers rose 3.2 percent last quarter, which bodes well for consumer demand in the first half of 2015, said Doug Handler, chief United States economist at IHS, a research firm in Lexington, Mass.
Over the course of 2015, Mr. Handler says he thinks the final sales metric will continue to gain speed, lifting the overall rate of expansion for the gross domestic product to 3.1 percent this year. For the entirety of 2014, the economy grew at 2.4 percent rate.
As for last quarter, Mr. Handler added, “most of the change in measured G.D.P. can be traced to a reduction in inventory growth. This is good news for the first quarter as it suggests the anticipated slowing of inventory growth will have less of an impact on the bottom line.”
http://www.nytimes.com/2015/02/28/business/economy/us-q4-gross-domestic-product-revision.html
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