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US growth slows in fourth quarter | US growth slows in fourth quarter |
(35 minutes later) | |
The world's largest economy expanded less than expected in the final three months of 2014 despite lower fuel prices boosting consumer confidence. | The world's largest economy expanded less than expected in the final three months of 2014 despite lower fuel prices boosting consumer confidence. |
The US posted annualised growth of 2.6% for the fourth quarter - lower than the 3% projected by economists. | The US posted annualised growth of 2.6% for the fourth quarter - lower than the 3% projected by economists. |
The figure was weaker than the 5% growth in the third quarter of 2014. | The figure was weaker than the 5% growth in the third quarter of 2014. |
However, the dramatic slide in fuel prices in recent months has put more money in consumers' pockets and allowed them to spend more. | |
Consumer spending, which accounts for more than two-thirds of US economic activity, rose by 4.3% in the fourth quarter - the fastest rise in nearly nine years - and higher than the 3.2% for the third quarter. | Consumer spending, which accounts for more than two-thirds of US economic activity, rose by 4.3% in the fourth quarter - the fastest rise in nearly nine years - and higher than the 3.2% for the third quarter. |
Fuel savings | Fuel savings |
Mark Zandi, chief economist at Moody's Analytics, said: "It took us a while to get here, but I think the economy is finally off and running. | Mark Zandi, chief economist at Moody's Analytics, said: "It took us a while to get here, but I think the economy is finally off and running. |
"We are seeing a number of positive developments. Businesses are hiring aggressively and the big drop in gas prices means that people have more money to spend on other items." | "We are seeing a number of positive developments. Businesses are hiring aggressively and the big drop in gas prices means that people have more money to spend on other items." |
The near-60% slide in oil prices in the plast seven months has cut the price of petrol to about $2 per gallon, or the equivalent of £1.32 for 4.5 litres. That is little more than British drivers pay for just one litre of petrol. | The near-60% slide in oil prices in the plast seven months has cut the price of petrol to about $2 per gallon, or the equivalent of £1.32 for 4.5 litres. That is little more than British drivers pay for just one litre of petrol. |
The fall has saved Americans about $175bn, Mr Zandi said: "A big part of growth this year will be people spending their gas savings." | The fall has saved Americans about $175bn, Mr Zandi said: "A big part of growth this year will be people spending their gas savings." |
For 2014 as a whole, the economy expanded by 2.4% - better than the 2.2% for the previous 12 months. | For 2014 as a whole, the economy expanded by 2.4% - better than the 2.2% for the previous 12 months. |
The report came two days after the Federal Reserve said the US economy was expanding at a "solid pace", but said it will "remain patient" in determining when to raise interest rates. The main rate has been held at close to zero since December 2008. | |
Weaker outlook | |
Some economists believe an increase could come in middle of the year, but Chris Williamson, chief economist at Markit, said Friday's data could delay a rise until late this year or even early 2016. | |
He feared that the US economy was too reliant on consumer spending given that business investment fell by an annualised rate of 1.9% - the biggest decline since the second quarter of 2009. "Ideally, a sustainable economic upturn requires business spending to be rising alongside consumer expenditure." | |
"While Markit's Flash PMI survey data signalled a further robust expansion of private sector business activity in January, the latest reading was the second weakest for 11 months and points to GDP growth sliding to 2% in the first quarter," Mr Williamson added. | |
"Companies also reported the weakest monthly increase in new orders since the recession, suggesting the pace of economic growth could weaken even further in February." |