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| U.S. economy grew at 2.6 percent pace in fourth quarter of 2014 | U.S. economy grew at 2.6 percent pace in fourth quarter of 2014 |
| (35 minutes later) | |
| The U.S. economy slowed its pace of growth between the months of October and December, according to government data released Friday morning, expanding at a 2.6 percent pace that was slightly below market expectations and half the rate of the blowout 5 percent expansion seen in the previous three months. | The U.S. economy slowed its pace of growth between the months of October and December, according to government data released Friday morning, expanding at a 2.6 percent pace that was slightly below market expectations and half the rate of the blowout 5 percent expansion seen in the previous three months. |
| The data drove down shares on Wall Street but also offered clues that the relative slowdown would be short-lived. The report from the Commerce Department showed buoyant consumer spending during the holiday season on everything from clothing to cars. Growth was hampered in the final quarter by weak federal spending, a relatively volatile factor that had spiked in the previous months. | The data drove down shares on Wall Street but also offered clues that the relative slowdown would be short-lived. The report from the Commerce Department showed buoyant consumer spending during the holiday season on everything from clothing to cars. Growth was hampered in the final quarter by weak federal spending, a relatively volatile factor that had spiked in the previous months. |
| This was just the second time in the last six quarters that GDP growth fell below 3 percent. But personal consumption — which accounts for about two-thirds of the country’s economic output — rose 4.3 percent, the best pace since 2006. | |
| That increased spending indicates the potentially profound effect that falling oil prices are having on the world’s largest economy. Cheaper prices at the pump have given workers hundreds of extra dollars to spend. That de facto tax cut coincides with a period of rapid job growth and could lead to a virtuous cycle in which real incomes rise, demand continues and the United States is able to insulate itself from sluggish demand overseas. | That increased spending indicates the potentially profound effect that falling oil prices are having on the world’s largest economy. Cheaper prices at the pump have given workers hundreds of extra dollars to spend. That de facto tax cut coincides with a period of rapid job growth and could lead to a virtuous cycle in which real incomes rise, demand continues and the United States is able to insulate itself from sluggish demand overseas. |
| “The headline [GDP] number looks pretty dim, but overall it’s all about the consumer at this point,” said Michael Dolega, a senior economist at TD Bank. “Other numbers will oscillate, but the recovery at this point is based on the consumer, and the consumer did come through in Q4; no doubt about it.” | “The headline [GDP] number looks pretty dim, but overall it’s all about the consumer at this point,” said Michael Dolega, a senior economist at TD Bank. “Other numbers will oscillate, but the recovery at this point is based on the consumer, and the consumer did come through in Q4; no doubt about it.” |
| If the latest numbers give cause for concern, it reflects way the stronger U.S. dollar is playing with the trade deficit. As the dollar surges against the euro and yen, U.S. exports become more expensive overseas. Meantime, Americans are gobbling up cheaper goods made overseas. The result? The trade deficit subtracted 1.02 percentage points from GDP growth during the fourth quarter. | If the latest numbers give cause for concern, it reflects way the stronger U.S. dollar is playing with the trade deficit. As the dollar surges against the euro and yen, U.S. exports become more expensive overseas. Meantime, Americans are gobbling up cheaper goods made overseas. The result? The trade deficit subtracted 1.02 percentage points from GDP growth during the fourth quarter. |
| For all of 2014, the U.S. economy grew at a 2.4 percent pace — a relatively dreary number much in line with the previous years of a long recovery. But that number is somewhat misleading: A brutal winter in the northeast led to a sharp contraction in the first quarter. Since then, the nation has seen its best nine-month stretch of growth since 2003 and 2004. Most economists think the momentum will continue: The International Monetary Fund pegs U.S. growth in 2015 at 3.6 percent, enough to easily outpace the rest of the developed world. | For all of 2014, the U.S. economy grew at a 2.4 percent pace — a relatively dreary number much in line with the previous years of a long recovery. But that number is somewhat misleading: A brutal winter in the northeast led to a sharp contraction in the first quarter. Since then, the nation has seen its best nine-month stretch of growth since 2003 and 2004. Most economists think the momentum will continue: The International Monetary Fund pegs U.S. growth in 2015 at 3.6 percent, enough to easily outpace the rest of the developed world. |
| Though there are constraints to growth — particularly the trade deficit and investment cutbacks in the domestic energy industry — the country has plenty going in its favor. The unemployment rate has fallen to 5.6 percent, a post-recession low. Housing demand among millennials is showing signs of taking off. The country just wrapped up its best year of job growth since 1999. And if the labor market tightens further, wages will finally start to pick up, further boosting consumer demand. | Though there are constraints to growth — particularly the trade deficit and investment cutbacks in the domestic energy industry — the country has plenty going in its favor. The unemployment rate has fallen to 5.6 percent, a post-recession low. Housing demand among millennials is showing signs of taking off. The country just wrapped up its best year of job growth since 1999. And if the labor market tightens further, wages will finally start to pick up, further boosting consumer demand. |
| Despite the somewhat slow fourth quarter, “the U.S. economy is on a roll,” Scott Hoyt, a Moody’s Analytics senior director of consumer economics, said in a written analysis. | Despite the somewhat slow fourth quarter, “the U.S. economy is on a roll,” Scott Hoyt, a Moody’s Analytics senior director of consumer economics, said in a written analysis. |
| The GDP numbers for the last quarter of 2014 could still fluctuate, and the data will be reassessed twice more over the next two months. In the third quarter, growth was initially pegged at 3.5 percent and eventually rose to 5 percent. | The GDP numbers for the last quarter of 2014 could still fluctuate, and the data will be reassessed twice more over the next two months. In the third quarter, growth was initially pegged at 3.5 percent and eventually rose to 5 percent. |
| Perceptions of the economy always lag behind the real-time shifts, but Americans are changing their views about the nation’s direction. Only 24 percent call the U.S. economy “poor,” compared with 39 percent a year earlier, according to a Pew Research Center survey conducted earlier this month. President Obama’s approval rating has ticked up as a result. | Perceptions of the economy always lag behind the real-time shifts, but Americans are changing their views about the nation’s direction. Only 24 percent call the U.S. economy “poor,” compared with 39 percent a year earlier, according to a Pew Research Center survey conducted earlier this month. President Obama’s approval rating has ticked up as a result. |
| In his State of the Union address, Obama touted the economy, noting that the nation had just wrapped up its best year of job creation in 15 years. “We have risen from recession freer to write our own future than any other nation on Earth,” Obama said. | In his State of the Union address, Obama touted the economy, noting that the nation had just wrapped up its best year of job creation in 15 years. “We have risen from recession freer to write our own future than any other nation on Earth,” Obama said. |
| The Federal Reserve earlier this week sounded an upbeat note about the economy and indicated a midyear short-term rate hike is still a possibility. | The Federal Reserve earlier this week sounded an upbeat note about the economy and indicated a midyear short-term rate hike is still a possibility. |
| The Fed said that the country was seeing “solid” growth and “strong” labor market expansion. But the Federal Open Market Committee’s statement indicated a wait-and-see approach on the rate hike, with the U.S. economy getting at least a few more months to prove it’s on firm ground. The Fed said it will be “patient” in determining when to raise its rates. | The Fed said that the country was seeing “solid” growth and “strong” labor market expansion. But the Federal Open Market Committee’s statement indicated a wait-and-see approach on the rate hike, with the U.S. economy getting at least a few more months to prove it’s on firm ground. The Fed said it will be “patient” in determining when to raise its rates. |