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Gross domestic product expanded at a 2.2 percent annual rate,
unrevised from last month's forecast, the Commerce Department said
on Friday in its third GDP estimate. The economy grew at a 5 percent
rate in the third quarter.
The government also reported that after-tax corporate profits fell
at a 1.6 percent rate in the fourth quarter, as a strong dollar
dented the earnings of multinational corporations.
After-tax profits increased at a 4.7 percent rate in the
July-September period. For all of 2014, profits dropped 8.3 percent,
the largest annual drop since 2008.
Slower economic growth together with benign inflation could prompt
the Federal Reserve to delay raising interest rates until later this
year. The U.S. central bank has kept its short-term lending rate
near zero since December 2008.
Fed officials last week lowered their individual growth estimates
for this year through 2017.
The moderate pace of expansion appears to have persisted through the
first quarter.
The sturdy dollar, lingering weakness in Europe and Asia, harsh
winter weather in the United States and a now-settled labor dispute
at the busy U.S. West Coast ports dampened activity in the first two
months of the year.
With temperatures rising, there are signs of some pick-up in
activity.
But the dollar, which gained 7.8 percent against the currencies of
the main U.S. trading partners between June and December, will
likely provide a challenge for domestic manufacturers.
First-quarter growth estimates range between a 0.9 percent and 1.4
percent rate.
Businesses accumulated $80 billion worth of inventory in the fourth
quarter, less than the $88.4 billion the government had estimated
last month.
As a result, inventories subtracted 0.10 percentage point from GDP
growth in the fourth quarter. Restocking was previously reported to
have added 0.1 percentage point to output.
The weak pace of restocking, however, removes the threat of an
inventory overhang, giving businesses scope to place more orders for
goods, which should help to stimulate manufacturing.
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Business investment on equipment was revised to show it rising at
0.6 percent rate instead of the previously reported 0.9 percent
pace. The slower rate of expansion in equipment spending likely
reflected the strong dollar and lower crude oil prices, which caused
a drop in drilling and exploration activity.
But consumer spending, which accounts for more than two-thirds of
U.S. economic activity, increased at a 4.4 percent rate in the
fourth quarter instead of the 4.2 percent pace reported last month.
It was the fastest rate since the first
quarter of 2006.
Consumer spending, however, moderated early in the first quarter as
cold and snowy weather kept shoppers at home.
Households also appear to have opted to save the bulk of their
savings from lower gasoline prices.
Despite slower global demand, export growth was revised higher. But
with consumer spending so strong, more imports than previously
estimated flowed into the country, resulting in a trade deficit that
weighed on GDP growth.
Trade lopped off 1.03 percentage points instead of the 1.15 points
reported last month.
Residential construction spending in the fourth quarter was revised
up, while government spending was a touch weaker than previously
reported.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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