The U.S. economy slowed sharply in the fourth quarter last year to a 0.7% pace of growth, due to the oil price crash and the strong dollar’s drag on exports.
Consumer spending slowed somewhat, but spending on homes held up in a sign of some tenacity amid a global economic slowdown and market turbulence.
It was the second straight quarterly deceleration, and a bit worse than the 0.9% rate that analysts had forecast. Gross domestic product expansion was 2.0% in the third quarter of 2015 and a brisk 3.9% in the second.
The slowdown came on the back of slumping business investment in buildings and equipment, related in part to the deep contraction in the oil sector. Also hitting growth was a drop in exports, linked to the strong dollar and slowing demand abroad. Imports also fell, helped by the lower cost of imported crude oil, but overall the net trade deficit was a larger drag on GDP growth than in previous months.
Supporting growth was consumer spending on durable goods, which slowed slightly, and services, which was barely changed from the previous quarter.
Also strong was home building and buying, and government spending. Falling federal government spending has been a persistent drag on economic output for several years; in the fourth quarter, a surge in especially defense-related spending made a solid contribution to overall growth.
The quarter rounded out a year that was somewhat disappointing, after early estimates forecast that economic activity might expand by as much as 3.0%. In the end, for the full year the economy mustered a 2.4% expansion, the same as in 2014.
Analysts took the data as a warning that the economy could be at the start of a soft patch. But the growth estimate for the period, the first from the Commerce Department, is subject to often significant revisions as more data comes in.
“For manufacturers, these data continue to highlight the softness seen in the overall sector, with global headwinds and falling commodity prices challenging demand and production,” Chad Moutray, chief economist for the National Association of Manufacturers, wrote in a blog post. “Overall, the U.S. economy remains stuck growing at a lethargic pace. Coming into 2015, manufacturers were hopeful that we were finally getting some traction in the economy, and yet, that never came to fruition.
“The current outlook is for real GDP to increase by 2% in 2016, and manufacturing activity has been clearly challenged by global headwinds. For instance, manufacturing production expanded just 0.8% year-over-year in December, and sentiment surveys indicate declining levels of activity at year’s end. With this in mind, policymakers need to adopt an agenda that will enable broad-based growth, both for manufacturers and for the larger economy.”
Copyright Agence France-Presse, 2016