US fourth-quarter GDP growth revised lower to a 0.5pc rate

US economic growth slowed more than previously estimated in the fourth quarter amid downgrades to business investment, including inventory accumulation, but corporate profits increased sharply, government data showed on Thursday.

Gross domestic product increased at a downwardly revised 0.5 percent annualized rate, the Commerce Department’s Bureau of Economic Analysis said in its third GDP estimate. The economy was previously reported to have grown at a 0.7 percent pace in the fourth quarter. The advance estimate had put GDP growth at 1.4 percent.

Economists polled by Reuters had forecast GDP growth would be unrevised at a 0.7 percent rate. Revisions to the fourth quarter’s growth pace reflected downgrades to business spending on intellectual products as well as inventories.

Growth in consumer spending, which accounts for more than two-thirds of the economy, was revised down to a 1.9 percent pace from the previously reported 2.0 percent rate.

Last year’s shutdown of the government was the key driver of the slowdown from the third quarter’s 4.4 percent growth pace.

Neither the third- nor fourth-quarter GDP readings are true reflections of the economy’s health.

Final sales to private domestic purchasers, which excludes government, trade and inventories, grew at a 1.8 percent pace in the fourth quarter. This measure of domestic demand, closely watched by policymakers, was previously estimated to have increased at a 1.9 percent rate. Domestic demand grew at a 2.9 percent pace in the July-September quarter.

Profits from current production increased at a rate of US$246.9 billion (HK$1.93 trillion) in the fourth quarter, surging from a US$175.6 billion growth pace in the third quarter.

When measured from the income side, the economy grew at a 2.6 percent rate in the fourth quarter. Gross domestic income increased at a 3.5 percent pace in the July-September quarter.

The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, grew at a 1.5 percent rate. Gross domestic output grew at a 4.0 percent rate in the third quarter.

Though growth likely picked up in the first quarter, the US-Israeli war on Iran is casting a cloud over the economy.

Reuters