US: The Fourth-Quarter GDP Growth Revised Up

The US economic growth had slowed in the fourth quarter, but not as abruptly as it was previously estimated, with the fairly strong consumer spending offsetting  drag from struggles by businesses to reduce an inventory overhang.

In the third GDP estimate, the Commerce Department said on Friday that the Gross domestic product increased at a 1.4% annual rate instead of previously reported 1.0% pace.

GDP growth was originally estimated to have risen at only on a rate of 0.7%. The economy grew at 2.0% rate in the 3rd quarter & had expanded 2.4% for all of 2015. The Economists polled by the Reuters estimated that the fourth-quarter GDP growth would be unrevised at the rate of 1.0%

The upward revision echoed a stronger pace of the consumer spending than it was previously estimated.

The Consumer spending that accounts for more than 2/3rd of the U.S. economic activity, rose at a 2.4% pace and not the 2.0% rate reported last month. The More consumption of the services than previously assessed accounted for revision.

The solid pace of the consumer spending underlines the economy’s underlying power and should further allay qualms of a recession that had earlier this year triggered a massive stock market sell-off.

Spending is being reinforced by the tightening labor market that is steadily lifting the wages, and rising the house prices. The Gasoline prices around 2 dollars per gallon are also assisting to underpin the household discretionary spending.

A temperately growing economy, that is combined with a strong jobs market & firming inflation, it likely to keep the Federal Reserve on a way to gradually raise the interest rates this year.

The dollar rose against a basket of currencies after the report. The United Stated stock &Treasury debt markets were closed for Good Friday.

Inventory investment was however revised lower in the fourth quarter. Yet the inventories remain high relative to the domestic demand.