Though the U.S. economic growth has stalled due to a strong currency, record-low oil prices, and excess inventories, the economy got a minor boost from consumer spending and the construction sector.
According to a federal report released Friday, the GDP spiked 1.4 percent between October and December, which was slightly better than the growth federal analysts had forecast a month prior.
Economists said that the growth was mainly due to a strong consumer spending which has helped the economy recover after a major slump in the manufacturing sector. Consumer spending was especially high in the services area including leisure.
“The consumer and housing are driving the economy despite some nasty headwinds,” noted Nariman Behravesh, a senior analyst with the IHS Global Insight.
Behravesh added that while U.S. manufacturing is affected by recession, service and housing sectors are doing ‘fairly well.’ Analysts estimate that two-thirds of the recent increase of the GDP stem from consumer spending, which in the U.S. represents nearly 70 percent of economic activity.
Economists expect a modest economic growth for this year at about 2 percent, but they claim that the better-than-expected economic growth for the fourth quarter gave the U.S. economy the necessary momentum for an entire year.
Chris Rupkey, an analyst at MUFG Union Bank, believes that the strong economic growth observed in late 2015 paves the way for a better-than-estimated first quarter growth.
Economists are now optimistic that the positive trends observed on the labor market would boost consumer spending even more and help ease the increased pressures from the international context paired with weaker U.S. exports.
The slow growth is also due to sinking oil prices worldwide, which forced oil companies to trim their workforce and cut investment spending. Residential investment, on the other hand, climbed steadily, and in the last quarter it reached 10.1 percent. That rise helped neutralize the 2.1 percent drop in other types of investments, especially those coming from the energy sector.
Other areas of weakness that curbed economic growth are corporate profits which sank 7.8 in Q4 from the previous quarter and 11.5 percent from a year prior. The worst annual drop in profits in the fourth quarter was recorded in 2008: about 30.8 percent due to the global financial crisis.
Although such steep declines steered concerns over a possible recession, Behravesh said that they were tied to the troubles in the energy industry.
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