United States GDP

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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.

The Federal Reserve expects economic growth to range between 2.6% and 3.0% in 2015 and between 2.5% and 3.0% in 2016. FocusEconomics Consensus Forecast panelists expect GDP to expand 3.1% in 2015, which is up 0.1 percentage pointsfrom last month’s forecast. For 2016, the panel expects the economy to expand 2.8%.

Author:, Economist

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United States GDP Chart

USA GDP Q4 2014

Note: Quarter-on-quarter annualized changes and annual variation of seasonally adjusted GDP in %.
Source: Bureau of Economic Analysis and FocusEconomics Consensus Forecast.

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