U.S. GDP Advanced 1.9% in Final Quarter of 2016
February 28 2017 - 9:00AM
Dow Jones News
By Jeffrey Sparshott and Ben Leubsdorf
WASHINGTON--U.S. consumer spending was stronger than initially
thought in the final months of 2016, though the overall
economic-growth trajectory remained muted amid downward revisions
for business investment and government spending.
Gross domestic product, a broad measure of the goods and
services produced across the economy, expanded at an inflation- and
seasonally adjusted annual rate of 1.9% in the fourth quarter, the
Commerce Department said Tuesday. That was unchanged from the
initially reported figure.
Economists surveyed by The Wall Street Journal had expected an
upward revision to a 2.1% growth rate.
The latest figures are a marked deceleration from the third
quarter's 3.5% pace, which had been the strongest reading in two
years. They are, however, broadly in line with an economy that has,
through ups and downs, settled at a roughly 2% growth pace since
the recession ended.
The current expansion has endured for more than seven years,
longer than the historical average, but its rate of growth has been
the weakest since at least 1949.
Despite the low trajectory, GDP data from the end of 2016 and
more recent indicators suggest the economy is on fairly solid
footing as February comes to a close.
Tuesday's report showed consumer spending, the main driver of
the economy, was stronger than thought. Personal consumption
expenditures were revised to a growth rate of 3%, compared with an
earlier estimate of 2.5%.
But business investment and spending by state and local
governments both were revised lower, wiping out any gains from
consumers. Nonresidential fixed investment--which measures business
spending on structures, equipment and intellectual
property--advanced at a 1.3% pace instead of the initially thought
2.4% rate. State and local government spending also expanded at a
1.3% pace, down from an initially estimated 2.6%.
Private inventories, a volatile category, added 0.94 percentage
point to the final GDP reading. International trade subtracted 1.7
points.
Economic output rose 1.9% in the fourth quarter compared with a
year earlier, close to the 2.1% rate since the recession ended in
mid-2009.
There are few signs of an imminent breakout. Hiring and consumer
spending appear relatively brisk so far in 2017, but the overall
economy is tracking at a 2.5% growth rate in the first quarter of
the year, according to the Federal Reserve Bank of Atlanta's GDPNow
model.
President Donald Trump has set a goal of generating 4% annual
growth by overhauling the tax code, rolling back federal
regulations, investing in roads and bridges, and other measures.
Such promises have boosted confidence among consumers and
businesses, though details remain uncertain.
Heavy equipment manufacturer Terex Corp. is hopeful tax and
regulatory reform, as well as infrastructure spending will boost
demand, though perhaps no sooner than next year, CEO John Garrison
told investors last week. Potential trade friction, however, could
hurt business.
"I'd say there's a net positive sentiment as a result of the
President Trump impact, with a whole lot of question marks that
we're all trying to understand," Mr. Garrison said.
Economists have cautioned it will be difficult to significantly
boost the economy's sustainable growth rate amid weak productivity
gains and demographic forces holding back labor force
expansion.
Tuesday's report also showed that inflation firmed slightly in
the final months of the year. The price index for personal
consumption expenditures advanced at a 1.9% pace in the fourth
quarter. Excluding food and energy, the gauge was up a mild
1.2%.
The Commerce Department's latest report on GDP can be accessed
at:
https://bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com and Ben
Leubsdorf at ben.leubsdorf@wsj.com.
(END) Dow Jones Newswires
February 28, 2017 08:45 ET (13:45 GMT)
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