U.S. economy slowed down in 4th quarter, cooled further in 2015
The U.S. economy turned in a tepid 2.2 per cent growth rate in the 4th quarter of 2014 and it is likely the slowdown continued into the first quarter of 2015.
Estimates for GDP in the January to March quarter range between 0.9 per cent and 1.7 per cent as severe winter weather took a toll.
That compares with a 5 per cent surge in the third quarter of 2014 and 2.4 per cent performance for the entire year, as confirmed by the latest figures from the Department of Commerce.
The department gives three estimates of growth for each quarter – the 2.2 per cent estimate released today is the third and final figure based on the latest data.
There are some red flags in the latest report – including a drop in non-residential investment and weaker profits.
The government reported that after-tax corporate profits fell at a 1.6 per cent rate in the fourth quarter, as a strong dollar dented the earnings of multinational corporations.
For all of 2014, after-tax profits dropped 8.3 per cent, the largest annual drop since 2008.
But American consumers increased their spending and the strength of personal consumption is expect to boost growth in the coming year.
Inflation is also very low, which could delay the Federal Reserve’s decision to raise rates, leaving more time for economic growth.
A strong U.S. economy is good news for Canada, as it is our biggest trading partner.
TD Bank economist Thomas Feltmate believes the U.S. is on track for a strong year, even after the slowdown in the first quarter.
“Our current tracking has real GDP growth slowing to 1.7 per cent in the first quarter of this year, but nonetheless still averaging three per cent for the year as a whole - the strongest annual pace in a decade,” he wrote in a note to investors.
That slowdown in the first quarter is similar to 2014, when the U.S. had negative GDP growth at the beginning of the year before picking up the pace.
“Helping lead the way will be continued strengthening in consumer demand. Indeed, recent retail sales data have been nothing to brag about, but a large portion of the weakness can be attributed to both bad weather and price effects stemming from lower gasoline prices,” he added.
