Home building, spending fuel US growth
Associated Press
WASHINGTON
Consumer spending and home construction are helping sustain modest U.S. economic growth despite problems caused by a strong dollar, low oil prices and an excess of business stockpiles.
The economy, as measured by the gross domestic product, grew at a 1.4 percent annual rate in the October-December period, the government said Friday. That was better than the 1 percent growth rate the government had estimated a month ago.
Much of the newfound strength came from consumer spending on services such as recreation, which helped offset a manufacturing slump caused in part by a global economic slowdown.
“The consumer and housing are driving the economy despite some nasty headwinds,” said Nariman Behravesh, chief economist at IHS Global Insight. “Manufacturing, for all intents and purposes, is in a recession, whereas the service sectors are doing fairly well, and housing has been a bright spot.”
Nearly two-thirds of the upward revision in GDP came from the boost in consumer spending, which accounts for about 70 percent of economic activity. Analysts were encouraged by the revised fourth-quarter estimate, saying it provided momentum for the rest of the year, when they expect growth to reach a stronger if still-modest 2 percent annual rate.
“Real economic growth was stronger than we thought late last year, and this makes us more hopeful that the first quarter will be better than expected,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
Economists say that steady job growth will support further gains in spending and help ease the pressures from overseas. The rise in the dollar’s value has contributed to a higher trade deficit by making U.S. exports more expensive overseas and imports less expensive for Americans.