US economy slows in fourth quarter

US economy slows in fourth quarter

A construction worker builds a single family home in San Diego, California, on Feb 15, 2017. (Reuters photo)
A construction worker builds a single family home in San Diego, California, on Feb 15, 2017. (Reuters photo)

WASHINGTON - US economic growth slowed in the fourth quarter as previously reported, with robust consumer spending offset by downward revisions to business and government investment.

Gross domestic product rose at a 1.9% annual rate in the final three months of 2016, the Commerce Department said on Tuesday in its second estimate for the period. That matched the estimate published last month.

Output increased at a 3.5% rate in the third quarter.

The economy grew 1.6% for all of 2016, its worst performance since 2011, after expanding 2.6% in 2015.

Economic data early in the first quarter has been mixed, with retail sales rising in January but homebuilding and business spending on capital goods easing.

The economy may get a boost from President Donald Trump's proposed stimulus package of sweeping tax cuts and infrastructure spending, as well as fewer regulations.

Mr Trump, who pledged during last year's election campaign to deliver 4% annual GDP growth, has promised a "phenomenal" tax plan that the White House said would include tax cuts for businesses and individuals.

Details on the proposal remain vague, though Treasury Secretary Steven Mnuchin said on Sunday that Mr Trump would use a policy speech to Congress on Tuesday night to preview some aspects of his tax reform plans.

Economists polled by Reuters had expected fourth-quarter GDP would be revised up to a 2.1% rate.

US Treasury prices rose after the data, while the dollar dipped against a basket of currencies. US stock index futures were largely unchanged.

Consumer spending, which accounts for more than two-thirds of US economic activity, was revised sharply higher to a 3% rate of growth in the fourth quarter. It was previously reported to have risen at a 2.5% rate.

That meant private domestic demand increased at a 3% rate, faster than the 2.8% pace reported last month.

Some of the rise in demand was met with imports, which increased at an 8.5% rate rather than the 8.3% pace reported last month. Exports declined, leaving a trade deficit that subtracted 1.7 percentage points from GDP growth as previously reported.

There was a small downward revision to inventory investment. Businesses accumulated inventories at a rate of $46.2 billion in the last quarter, instead of the previously reported $48.7 billion. Inventory investment added 0.94 percentage points to GDP growth, down from the 1.0 percentage point estimated last month.

Business investment was revised lower to reflect a more modest pace of spending on equipment, which increased at a 1.9% rate instead of the previously estimated 3.1% pace. That was still the first increase in over a year and reflected a surge in gas and oil well drilling in line with rising crude oil prices.

Spending on mining exploration, wells and shafts increased at a 23.6% rate instead of the previously reported 24.3% pace. It declined at a 30% pace in the third quarter.

Investment in non-residential structures was revised to show it falling at a less steep 4.5% pace in the fourth quarter. It was previously reported to have declined at a 5% rate. Overall, business investment contributed 0.17 percentage points to GDP growth, less than the 0.30 percentage points reported last month.

Spending on residential construction increased at a 9.6% rate, which was downwardly revised from the 10.2% pace reported last month. The rebound followed two straight quarterly declines.

Government spending increased at a 0.4% rate in the fourth quarter, rather than the previously reported 1.2% pace of growth. As a result, government investment made no contribution to growth. It was previously reported to have contributed 0.21 percentage points.

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