Gross domestic product came in weaker than economists anticipated for the fourth quarter. Yet Friday morning economists were encouraging Americans to not let this overshadow solid annual growth and solid future prospects.
On Friday, the Bureau of Economic Analysis released its advance estimate of real GDP for the fourth quarter of 2014 — covering October, November and December of last year. The release showed output in the U.S. increasing at a rate of 2.6%. This is a deceleration from the third quarter when real GDP gained a surprising 5%. Economists on average were anticipating 3% or stronger growth in Q4.
BEA — a division of the Department of Commerce – also reported 2.4% GDP growth from the 2013 annual level to the 2014 annual level. This, the best full year growth since 2010, was weighed down by an ugly first quarter that most ultimately attributed to severe winter weather.
In a note on the report Jim Baird, CIO for Plante Moran Financial Advisors, wrot , “The exceptionally soft first quarter put the growth rate in a hole right out of the gate last year. In the aftermath, the economy rebounded nicely, growing at a roughly 4% rate through the next three quarters.” GDP decline 2.1% in the first quarter.
Baird also said, “All things considered, today’s report on GDP reinforces the prevailing view on the economy. It is still pushing in a positive direction – a fact that is verified by a host of economic data.”
The 2.6% growth in the final three months of the year was driven by 4.3% personal consumption expenditures growth which was in part due to lower oil prices freeing funds for other things. This was the strongest PCE gain since 2006 according to Baird. Also contributing to growth was increased private inventory investment, exports, fixed investments, and non-federal government spending. Offsetting those positive contributors was more imports — which negatively impact GDP — and less federal government spending.