United States economic growth slowed more than previously estimated in the fourth quarter, as weaker business investment and inventory accumulation weighed on activity, according to revised government data.
The gross domestic product (GDP) expanded at an annualised rate of 0.5%, the Bureau of Economic Analysis said in its third estimate.
The figure marked a downgrade from the previously reported 0.7% pace and a sharp revision from the initial estimate of 1.4%.
Economists had expected the growth rate to remain unrevised at 0.7%.
The downward adjustment largely reflected weaker business spending, particularly on intellectual property products, as well as a softer contribution from inventories.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was also revised lower, rising at a 1.9% pace compared with the previously reported 2.0%.
"The contributors to the increase in real GDP in the fourth quarter were increases in consumer spending and investment. These movements were partly offset by decreases in government spending and exports. Imports, which are a subtraction in the calculation of GDP, decreased."
The release further noted: "From an industry perspective, the increase in real GDP reflected an increase of 2.3 percent in real value added for private services-producing industries that was partly offset by decreases of 7.8 percent in government and 1.8 percent in private goods-producing industries. The leading industry contributors to the increase in real GDP were wholesale trade, information, and health care and social assistance.”
The slowdown follows a much stronger third quarter, when the economy expanded at a 4.4% annualised rate. Last year’s government shutdown was cited as a key factor behind the deceleration in growth.
Despite the weaker headline figure, some underlying measures of demand remained relatively resilient. Final sales to private domestic purchasers, a closely watched gauge that excludes government spending, trade and inventories, rose at a 1.8% pace in the fourth quarter, slightly below the previous estimate of 1.9%.
This measure had increased at a 2.9% rate in the third quarter.
Corporate profitability, however, strengthened significantly. Profits from current production surged by $246.9 billion in the fourth quarter, accelerating from a $175.6 billion increase in the prior quarter.
From the income side, the economy showed stronger momentum. Gross domestic income grew at a 2.6% annualised rate in the fourth quarter, following a 3.5% increase in the July-to-September period.
A blended measure of output, averaging GDP and GDI, often referred to as gross domestic output, rose at a 1.5% pace, down from 4.0% growth in the third quarter, offering a more moderate view of economic activity.
