The U.S. economy slowed more sharply in the final three months of the year than initial estimates, reflecting weaker business stockpiling and a bigger trade deficit.
The Commerce Department said Friday that the economy as measured by the gross domestic product grew at an annual rate of 2.2% in the October-December quarter, weaker than the 2.6% first estimated last month. It marked a major slowdown from the third quarter, which had been the strongest growth in 11 years.
Economists remain optimistic that the deceleration was temporary. Many forecast that growth will rise above 3% in 2015, which would give the country the strongest economic growth in a decade. They say the job market has healed enough to generate strong consumer spending going forward.
The economy is “doing just fine,” said Paul Ashworth, chief U.S. economist at Capital Economics, who noted that although GDP growth slowed in the fourth quarter, the U.S. added an average of 284,000 new jobs from October through December.
For all of 2014, the economy expanded 2.4%, up slightly from 2.2% in 2013.
Consumer spending, which accounts for 70% of economic activity, was a bright spot in the fourth quarter. It expanded at an annual rate of 4.2%, down slightly from the first estimate of 4.3% but still the best showing since the first quarter of 2006.
Friday’s report was the second of three estimates for fourth-quarter GDP, the broadest measure of the economy’s total output of goods and services.
Sal Guatieri, senior economist at BMO Capital Markets, said that “while the economy ended the year with less momentum than in the summer and fall, average annual growth of 2.9% in the past six quarters still denotes a meaningful upward shift from 2.1% in the first four years of the recovery.”