United States: Economic growth cools in Q4 but 2014 annual reading strongest in four years
January 30, 2015
In the fourth quarter of 2014, GDP expanded at a seasonally adjusted annualized rate (SAAR) of 2.6%, according to the advance estimate released by the Bureau of Economic Analysis (BEA) on 30 January. The print came in well below the 5.0% expansion recorded in the third quarter and fell short of market expectations of a 3.2% increase. The slowdown reflects that robust private consumption was insufficient to compensate for weaker fixed investment and a negative contribution from the external sector. Despite the slowdown in Q4, GDP expanded 2.4% in the full year 2014, which marked the fastest growth in four years.
On the domestic side, private consumption expanded 4.3% in Q4, which was up from the 3.2% tallied in Q3 and marked the strongest growth since well before the crisis hit. In contrast, non-residential fixed investment tumbled from an 8.9% rise in Q3 to a 1.9% increase in Q4. Residential fixed investment growth picked up to a 4.1% rise in Q4 (Q3: +3.3% quarter-on-quarter SAAR). Meanwhile, government spending contracted 2.2% in Q4 after having increased 4.4% in the previous quarter. Business inventories were also a drag on growth.
Exports increased 2.8% in the fourth quarter (Q3: +4.6% qoq SAAR) and imports surged 8.9% (Q3: -0.9% qoq SAAR). Consequently, the external sector’s net contribution to overall growth swung from plus 0.8 percentage points in the third quarter to minus 1.0 percentage points in the fourth.
Author: Carl Kelly, Economist