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US growth estimate in surprise downward revision | US growth estimate in surprise downward revision |
(40 minutes later) | |
The US Department of Commerce has unexpectedly cut its estimate of fourth-quarter growth to an annualised 2.8%, from 3.2% previously. | The US Department of Commerce has unexpectedly cut its estimate of fourth-quarter growth to an annualised 2.8%, from 3.2% previously. |
Analysts had instead expected the figure to be revised up slightly to 3.3%. | Analysts had instead expected the figure to be revised up slightly to 3.3%. |
Lower government spending than previously estimated was the main reason for the downward revision. | Lower government spending than previously estimated was the main reason for the downward revision. |
Economic growth for the whole of 2010 was also revised down slightly, from 2.9% to 2.8%. | Economic growth for the whole of 2010 was also revised down slightly, from 2.9% to 2.8%. |
As well as lower state and local government spending during the final three months of last year, consumer spending grew at a slower rate than previously estimated. | As well as lower state and local government spending during the final three months of last year, consumer spending grew at a slower rate than previously estimated. |
Despite the downward revision, Wall Street gained ground in early trading, with the Dow Jones index rising 42 points to 12,110 as the price of oil retreated from the two-and-a-half year highs seen on Thursday. | |
The latest figure for final-quarter growth is the second estimate - the figure will be revised again next month. | The latest figure for final-quarter growth is the second estimate - the figure will be revised again next month. |
Revised figures also released on Friday showed that the UK economy shrank by 0.6% in the fourth quarter compared with the original estimate of a 0.5% contraction. | Revised figures also released on Friday showed that the UK economy shrank by 0.6% in the fourth quarter compared with the original estimate of a 0.5% contraction. |
By way of comparison, on a non-annualised basis, the US growth figures were revised from 0.8% to 0.7%. | |
Unemployment | Unemployment |
Despite the downward revision, US economic growth still picked up in the final quarter, as growth in the previous quarter was 2.6%. | Despite the downward revision, US economic growth still picked up in the final quarter, as growth in the previous quarter was 2.6%. |
A rise in consumer spending contributed to the growth, as did falling imports, rising exports and a rise in commercial real estate. | A rise in consumer spending contributed to the growth, as did falling imports, rising exports and a rise in commercial real estate. |
There are widespread concerns in the US that economic growth is not strong enough to bring down the high unemployment rate, which currently stands at 9%. | There are widespread concerns in the US that economic growth is not strong enough to bring down the high unemployment rate, which currently stands at 9%. |
Earlier this month, Federal Reserve Chairman Ben Bernanke estimated it would take about 10 years for the unemployment rate to fall to a more sustainable 5%-6% at current economic growth rates. | Earlier this month, Federal Reserve Chairman Ben Bernanke estimated it would take about 10 years for the unemployment rate to fall to a more sustainable 5%-6% at current economic growth rates. |
The latest GDP revision figures could raise questions about future growth, analysts said, given the government's plans to cut spending in order to bring down the country's large budget deficit. | The latest GDP revision figures could raise questions about future growth, analysts said, given the government's plans to cut spending in order to bring down the country's large budget deficit. |
President Obama has outlined plans to cut $1.1tn (£620bn) from the deficit over the next 10 years. | President Obama has outlined plans to cut $1.1tn (£620bn) from the deficit over the next 10 years. |
The deficit - the amount by which government expenditure exceeds its income in any given year, expressed as a percentage of GDP - currently stands at 9%. | The deficit - the amount by which government expenditure exceeds its income in any given year, expressed as a percentage of GDP - currently stands at 9%. |