US Growth Revised Down To 2.2%

The slowdown in the US economy at the end of last year was more pronounced than previously thought, official figures have shown.

The world’s largest economy grew at an annual pace of 2.2% between October and December, against a previous estimate of 2.6%, the Commerce Department said.

The downward revision was due to a slower rise in business inventory investment than previously estimated.

The US economy grew at an annual pace of 5% in the previous quarter.

The slowdown in growth from the third quarter was caused by a rise in imports and a downturn in government spending.

The second estimate of US growth is based on a more complete source of economic data.

Investors initially took the revised figure in their stride, with the Dow Jones opening unchanged, but the index slipped in afternoon trading to end the day down 0.5% at 18,133.

“The reason for the lack of concern is that the slowdown was due in part to a far smaller than previously estimated inventory build-up, in turn thought to be partly due to port strikes”, said Chris Williamson, chief economist at Markit.

“The weaker stock build-up late last year bodes well for first quarter growth.”

Flexible rates

Economists are pretty upbeat about the general state of the US economy, despite the slowdown in the fourth quarter.

Consumer spending, which accounts for about 70% of economic growth, is strong, thanks in part to dramatic falls in the price of petrol, giving consumers more money to spend on other things.

Unemployment is coming down and with negative inflation, the Federal Reserve has little choice but keep interest rates at close to zero for the time being.

Earlier this week, Fed chair Janet Yellon said the US economy was improving, while the employment market remained fragile. In her twice yearly address to Congress, she said there was still a good degree of flexibility as to when rates could be increased.

Most analysts expect a rate rise sometime late in the summer or in the autumn.

Source: BBC News