US revises 4Q economic growth higher

WASHINGTON • The US economy grew in the fourth quarter at a faster pace than last estimated, helped by an upward revision to household spending on services and a smaller drag from inventories, according to Commerce Department data released yesterday.

  • Gross domestic product grew at a 2.9% annualised rate, revised from 2.5%.
  • Consumer spending, biggest part of the economy, grew 4% revised from 3.8%.
  • Before-tax corporate pretax profits rose 2.7% year-on-year in the first estimate issued for the fourth quarter (4Q); climbed 5.3% in 3Q.
  • Inventories subtracted 0.53 ppt from gross domestic product (GDP) growth, compared to prior estimate of 0.7 ppt drag.
  • Nonresidential fixed investment rose 6.8%, revised from 6.6% gain and reflecting a 6.3% jump in outlays for structures.
  • Gross domestic income, adjusted for inflation, rose 0.9% following 2.4% gain in 3Q.

The revisions to GDP, the value of all goods and services produced in the US, indicate the economy was on a solid footing coming into the current quarter.

Price data in the GDP report showed inflation is hovering near the US Federal Reserve’s 2% goal. Excluding food and energy, the central bank’s preferred price index that is tied to personal spending rose at an unrevised 1.9% annualised rate.

The report also included the first look at the health of corporate America toward the end of 2017. The gain in 4Q profits from a year earlier, together with lower corporate taxes following the tax overhaul signed by US President Donald Trump late last year, bodes well for business investment and employment.

Household purchases, which account for about 70% of the economy, also are likely to be supported in coming months by bigger after-tax paychecks and the robust labour market.

Continued gains in consumer spending and business investment will help to sustain the expansion even as GDP growth is projected to cool somewhat in the 1Q. — Bloomberg