- Paul Ashworth, chief U.S. economist at Capital Economics
The world's number one economy unexpectedly grew at a faster pace in the final quarter of 2015 than initially estimated, reflecting a higher value of business inventories. The US economy expanded at a 1% rate in the final three months of 2015, better than a previously reported 0.7% gain, according to the Commerce Department. The economy still lost a lot of momentum, though, after growing 2% in the third quarter. Nevertheless, growth is projected to re-accelerate this year as consumers enjoy the benefits of a improving job market and savings on gasoline to boost spending.
US businesses reduced inventories much less than initially estimated in the fourth quarter. The revised inventory estimate entirely accounts for the upward revision of GDP growth. The change in private inventories provided a 0.14 percentage point drag on growth, rather than the 0.45 point drag estimated a month ago. At the same time, household spending, the backbone of the US economy, rose even less, the revisions showed. Consumers bought $56.9 billion worth of goods and services at the end of the year. That is an increase of 2% in annualized terms compared to three months earlier. Moreover, imports subtract from GDP, as they fell at a 0.6% pace, compared with the initial reading of a 1.1% gain. However, exports contributed to GDP growth.
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