The US economy cooled off a bit in the final three months of 2014.
GDP increased by 2.6% in Q4.
This was down from 5.0% in Q3. And it was a bit lower than the 3.0% growth rate expected by economists.
“The undershoot reflects weak capex, with spending on business equipment down 1.9%, and net foreign trade, which subtracted 1.0 percentage points, ” Pantheon Macroeconomics’ Ian Shepherdson said.
Government spending fell 2.2% during the period.
Personal consumption, however, jumped by 4.3% during the period. This was much stronger than the 4.0% rate expected. It added a whopping 2.87 percentage points to GDP growth.
Economists are attributing the robust consumption numbers to the drop in energy prices, which has given consumers the flexibility and confidence to spend more.
“The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment that were partly offset by a negative contribution from federal government spending,” the Bureau of Economic Analysis said.
Real final sales, which is GDP excluding the change in private inventories, increased by 1.8% during the period. This was down from 5.0% in Q3.
“We believe this is consistent with the anticipated moderation in growth momentum heading into 2015 and look for strong domestic consumption to continue supporting growth momentum in the coming quarters even as investment suffers due to falling oil prices,” TD Securities Gennadiy Goldberg said.
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