The US economy unexpectedly expanded at a faster pace in the fourth quarter than initially estimated, reflecting a higher value of business inventories.
Gross domestic product, the value of all goods and services produced, grew at a 1 per cent annualised rate, compared with an initial estimate of 0.7 per cent, US Commerce Department figures showed on Friday.
Consumer spending was revised lower. Although the economy slowed in the fourth quarter from 2 per cent in the previous three months, growth is projected to re- accelerate this year as consumers tap into the benefits of a strengthening job market and savings on petrol to boost spending.
With companies making less headway in adjusting stockpiles, one risk for the economy is further weakness in manufacturing and business investment.
‘Dragging on’
“This inventory correction keeps surprising us - it keeps dragging on,” said Nariman Behravesh, chief economist at IHS in Massachusetts, who is the top forecaster of GDP over the past two years according to data compiled by Bloomberg.
“If the inventory drag continues into the first quarter, the first quarter could be a little bit weaker because you get that spillover. The fundamentals are still pretty solid, but there clearly are some short-term wobbles.”
The GDP estimate is the second of three for the quarter, with the other release scheduled for next month when more information can be incorporated. The revision shows GDP expanded 2.4 per cent in 2015.
The changes to fourth-quarter growth largely reflected how unsold goods are valued. In inflation-adjusted terms, there was more inventory accumulation that previously estimated as underlying price data were revised up.
