WASHINGTON, March 25 (Reuters) - - U.S. economic growth slowed in the fourth quarter, but not as sharply as previously estimated, with fairly strong consumer spending offsetting the drag from efforts by businesses to reduce an inventory overhang.
Gross domestic product increased at a 1.4 percent annual
rate instead of the previously reported 1.0 percent pace, the
Commerce Department said on Friday in its third GDP estimate.
GDP growth was initially estimated to have risen at only a
0.7 percent rate. The economy grew at a rate of 2.0 percent in
the third quarter and expanded 2.4 percent for all of 2015.
Economists polled by Reuters had expected that
fourth-quarter GDP growth would be unrevised at a 1.0 percent
rate.
The upward revisions reflected a stronger pace of consumer
spending than previously estimated.
Consumer spending, which accounts for more than two thirds
of U.S. economic activity, rose at a 2.4 percent pace rather
than the 2.0 percent rate reported last month. That reflected
more consumption of services than previously estimated.
The fairly solid pace of consumer spending underscores the
economy's underlying strength and should further allay fears of
a recession, which triggered a massive stock market sell-off
early this year.
Spending is being supported by a tightening labor market,
which is steadily lifting wages, and rising house prices.
Gasoline prices around $2 per gallon are also helping to
underpin household discretionary spending.
Inventory investment was revised lower. Still, inventories
remain high relative to domestic demand.
Businesses accumulated $78.3 billion worth of inventory
rather than the $81.7 billion reported last month. As a result,
inventories subtracted 0.22 percentage point from GDP growth
instead of the previously reported 0.14 percentage point.
First-quarter GDP growth estimates are around a 1.5
percent rate. But with the inventory pile still large and
shipments of capital goods ordered by businesses weak in January
and February, the risks to growth are tilted to the downside.
There was some bad news in the GDP report, with corporate
profits falling for a second straight quarter as a strong dollar
and cheap oil undercut the earnings of multi-national companies.
Profits after tax with inventory valuation and capital
consumption adjustments declined at an annual rate of 8.4
percent, the biggest drop since the first quarter of 2014, after
dropping at a 1.7 percent pace in the third quarter.
Profits from current production fell $159.6 billion after
decreasing $33.0 billion in the third quarter.
For all of 2015 profits dropped 5.1 percent, the largest
drop since 2008, after slipping 0.6 percent in 2014.
Part of the drop in profits in the fourth quarter was due to
a $20.8 billion transfer payment related to the BP oil spill in
the Gulf of Mexico in 2010, which was the largest U.S. offshore
oil spill.
Profits from the rest of the world decreased $6.5 billion in
the final three months of 2015 after sliding $23.1 billion in
the third quarter.
Manufacturing profits declined $139.2 billion during the
last quarter after decreasing by $4.1 billion in the
July-September period. Profits in the petroleum and coal
products sector tumbled $124.3 billion after rising $7.0 billion
in the third quarter.
The dollar gained 10.5 percent last year versus the
currencies of the United States' main trading partners, putting
a squeeze on the profits of multinationals such as Procter &
Gamble and Colgate-Palmolive.
A more than 60 percent plunge in crude oil prices from highs
above $100 a barrel in June 2014 has also hurt the profits of
oilfield service firms like Schlumberger and Halliburton
.
But with the dollar's appreciation slowing since the start
of the year and the oil price slide ebbing, corporate profits
are poised to rise, helping to underpin job growth.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
