Sun, Mar 27, 2016 - Page 13 News List

Consumer spending edges US growth up

HELPING HAND:Residential investment grew at an annual rate of 10.1 percent in the fourth quarter of last year, offsetting a 2.1 percent decline in nonresidential investment


Consumer spending and home construction are helping sustain modest US economic growth despite problems caused by a strong US dollar, low oil prices and an excess of business stockpiles.

The nation’s GDP grew 1.4 percent year-on-year in the fourth quarter of last year, the US government said on Friday.

That was better than the 1 percent growth rate the government estimated last month.

Much of the newfound strength came from consumer spending on services such as recreation, which helped offset a manufacturing slump caused in part by a global economic slowdown.

“The consumer and housing are driving the economy despite some nasty headwinds,” IHS Global Insight chief economist Nariman Behravesh said. “Manufacturing for all intents and purposes is in a recession, whereas the service sectors are doing fairly well and housing has been a bright spot.”

Nearly two-thirds of the upward revision in GDP came from the boost in consumer spending, which accounts for about 70 percent of economic activity.

Analysts were encouraged by the revised fourth-quarter estimate, saying it provided momentum for the rest of this year, when they expect growth to reach a stronger if still-modest 2 percent annual rate.

“Real economic growth was stronger than we thought late last year and this makes us more hopeful that the first quarter will be better than expected,” MUFG Union Bank New York-based chief economist Chris Rupkey said.

Economists said that steady job growth would support further gains in spending and help ease the pressures from overseas.

The rise in the US dollar has contributed to a higher trade deficit by making US exports more expensive overseas and imports less expensive in the US.

Another source of weakness has come from the drop in oil prices, which has triggered layoffs at energy companies and sharp reductions in investment spending on drilling and exploration.

Friday’s report showed that residential investment in the US grew at an annual rate of 10.1 percent in the fourth quarter of last year. That surge helped offset a 2.1 percent drop in nonresidential investment resulting in part from cutbacks at energy companies.

Behravesh said he foresees year-on-year GDP growth for the US in this quarter of about 1.5 percent, with gradual strengthening as the weakness from low energy prices and paring of stockpile levels wanes.

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