US economic growth did not slow as sharply as initially thought in the fourth quarter of 2015, which will be welcome news for the Federal Reserve as policymakers consider whether - and when - to raise
US government economists sifting through the latest data on economic growth in the final three months of last year have concluded that things were not as bad as they thought.
It seems gross domestic product increased at a 1.0 percent annual rate in Q4 rather than the previously calculated 0.7 percent pace.
— BEA News (@BEA_News) 26 February 2016
For all of last year that means the US economy expanded by 2.4 percent.
The figures for Q1 were 0.6 percent growth, Q2 saw 3.9 percent and in Q3 the economy expanded at an annualised 2.0 percent rate
One slightly worrying discovery was that US businesses had more inventory on their shelves than previously thought in Q4 – $81.7 billion worth rather than the $68.6 billion reported earlier.
That could slow the economy in the early part of this year which will be a concern for the Federal Reserve as policymakers consider whether – and when – to raise interest rates.
January consumer spending and inflation more hopeful
As the revised growth numbers were released, the Fed also got some welcome news indicating the US is not facing an imminent recession – US consumer spending rose solidly in January and underlying inflation picked up by the most in four years.
The US Commerce Department said consumer spending increased 0.5 percent, the largest gain since March 2015, as households bought more of a range of goods. In addition the return to normal US winter temperatures boosted demand for heating.
Consumer spending, which accounts for more than two-thirds of US economic activity, rose by an upwardly revised 0.1 percent in December 2015.
Excluding food and energy, prices rose 0.3 percent. That was the largest increase since January 2012 and followed a 0.1 percent gain in December.
The so-called core PCE price index increased 1.7 percent in the 12 months through January, the largest rise since July 2014.
The combination of solid consumer spending, a strengthening jobs market and steadily rising inflation suggests further interest rate hikes by the Fed cannot be ruled out this year.