Economic expansion in the United States slowed more than initially reported during the fourth quarter, driven by reductions in business investment and inventory accumulation, though corporate profits saw a notable increase, government figures released on Thursday showed.
The Commerce Department’s Bureau of Economic Analysis revised the gross domestic product (GDP) growth rate downward to an annualized 0.5% for the final quarter of the year. This adjustment contrasts with earlier estimates of 0.7% growth, while the initial advance estimate had suggested a 1.4% increase. Economists had anticipated the GDP figure would remain steady at 0.7%.
The downward revision primarily reflected weaker business spending on intellectual property products and inventory levels. Consumer spending, which constitutes over two-thirds of the economy, was also adjusted slightly lower to a 1.9% growth rate from the previously reported 2.0%.
The slowdown from the robust 4.4% growth seen in the third quarter was largely attributed to last year’s government shutdown. However, neither the third nor fourth quarter GDP figures fully capture the economy’s underlying strength. Final sales to private domestic purchasers, a key indicator that excludes government, trade, and inventory changes, expanded at a 1.8% pace in the fourth quarter, slightly below the earlier estimate of 1.9%. This measure had grown at 2.9% in the July-September period.
In a significant development, profits from current production surged to $246.9 billion in the fourth quarter, up sharply from $175.6 billion in the previous quarter. From the income perspective, the economy grew at a 2.6% rate in the final quarter, following a 3.5% increase in the third quarter.
The average of GDP and gross domestic income (GDI), often regarded as a more comprehensive gauge of economic activity known as gross domestic output, rose by 1.5% in the fourth quarter, down from 4.0% growth in the third quarter.
Looking ahead, although growth is expected to accelerate in the first quarter, the ongoing US-Israeli conflict with Iran is casting uncertainty over the economic outlook.
