US Q4 economic growth unrevised at tepid 0.6 pct
The US economy grew at a tepid 0.6 percent annual pace in the fourth quarter of last year, the government said Thursday in a final unrevised reading.
The final estimate on fourth-quarter growth confirmed that the world’s largest economy slowed markedly during the last three months of 2007 compared with a blistering 4.9 percent clip in the third quarter.
Most economists had expected the Commerce Department to leave gross domestic product (GDP) growth unrevised at 0.6 percent.
Economic output moderated in the fourth quarter amid a widespread housing market downturn and as a related credit squeeze in the US banking system broadened in the final months of last year.
The credit crunch has worsened in recent months and a growing number of economists believe the US economy has now fallen into a recession.
Fourth-quarter growth matched the pace of economic output during the first quarter of last year, and marked the weakest expansion since the fourth quarter of 2002.
Economic growth for all of 2007 was recorded at 2.2 percent compared with a 2.9 percent expansion during the prior year. Overall growth last year was the weakest since 2002.
Economic momentum slowed during late 2007 despite the Federal Reserve moving to cut US interest rates in a bid to bolster a slowing economy and a stressed housing market.
Fed policymakers, led by central bank chairman Ben Bernanke, have aggressively slashed the short-term federal funds rate to 2.25 percent from 5.25 percent since September in a bid to keep growth shored up.
The central bank’s rate-cutting drive has, however, been complicated by rising inflationary pressures, particularly rocketing crude oil prices.
The government trimmed its estimate for consumer price inflation measured by Personal Consumption Expenditures (PCE) during the fourth quarter to a gain of 3.9 percent compared with a prior estimate of 4.1 percent.
The core PCE reading, which strips out volatile food and energy costs, was revised lower to 2.5 percent from 2.7 percent.
The downward revisions to the PCE inflation gauges, which are tracked closely by central bank policymakers, might give Fed chairman Bernanke some comfort that last year’s rate cuts did not unduly stoke inflation pressures.
Oil prices, however, have surged to record highs in recent weeks and last week came close to striking 112 US dollars per barrel for the first time. Other commodity prices have also leapt higher this year.
Some analysts belive this will make it harder for the Fed to continue slashing rates although Bernanke has said that he expects slowing growth to temper inflation pressures.
The Commerce Department survey revised consumer spending slightly higher to a quarterly reading of 2.3 percent compared with a previous estimate of 1.9 percent, partly due to increased demand for big-ticket durable goods.
The increased revision to consumer spending was partially offset by a lowered revision to nonresidential business investment which was tweaked to a reading of 6.0 percent compared with 6.9 previously.
Real estate investment, which applied a major brake to overall growth during the fourth quarter, was unrevised to show a plunge of 25.2 percent, marking the weakest period of activity since 1981.
The deflating housing market shaved 1.25 percentage points from GDP during the quarter.
The business sector trimmed inventories by 18.3 billion US dollars during the last three months of the year, subtracting 1.79 percentage points from growth.
Business investment was revised to show growth of 6.0 percent compared with a prior reading of 6.9 percent.
Exports were revised to show a gain of 6.5 percent compared with a prior estimate of 4.8 percent, likely spurred by a weakening dollar.
Imports, by contrast, were revised to post a gain of 1.4 percent compared with a prior reading showing a negative 1.9 percent.
source:smh