US economy posts slowest growth since 2011

WASHINGTON: The US economy slowed sharply in the final three months of the year, the slowest pace since 2011, the Commerce Department reported on Friday.

The first estimate of gross domestic product (GDP) showed growth of 1.9% in the September-December period, well below the 3.5% pace of the third quarter, and short of the consensus estimate by analysts of 2.2%.

For the full year, the economy expanded 1.6%, a full point below the pace of 2015.

”The deceleration of real GDP in the fourth quarter reflected a downturn in exports, an acceleration in imports... and a downturn in federal government spending,” the report said.

Exports fell 4.3% in the latest quarter, while imports rose 8%. Together those two factors subtracted 1.7 points from GDP in the quarter. Federal spending fell 1.2%.

But the economy was buoyed by an 11% surge in spending on durable goods, like large appliances, and a 10% jump in residential investment.

The tepid growth for the fourth quarter would seem to confirm the expectation that the Federal Reserve will hold off on another interest rate increase, when central bankers meet next week, after they raised the benchmark rate in December for only the second time in a decade.

However, the Fed’s preferred inflation measure, the Personal Consumption Expenditures index, jumped to 2.2% the final quarter of the year, from 1.5% in the prior quarter, which is above the Fed’s 2.0% target and the highest since early 2012. 

Excluding volatile food and energy prices, the so-called core PCE price index slowed to 1.3% from 1.7% in the third quarter.

For the full year the price index increased 1.1% compared to 2015, while the core was up 1.7%, the fastest since 2012.

In a separate report, the Commerce Department said new orders for durable goods fell 0.4% in December, which is consistent with the GDP data but likely will surprise analysts who expected a three percent increase.

However, when transportation products are excluded, new orders rose 0.5%. The figure jumped 1.7% when defense is removed from the data. - AFP