U.S. Economy Posts Abysmal 4Q Growth: GDP Just 1.4%

The final reading on fourth-quarter gross domestic product (GDP) showed the U.S. economy grew at an annualized pace of 1.4%, down from the third-quarter’s final reading of 2%, according to the Commerce Department.

Economists had forecast a 1% growth rate for the world’s biggest economy. While GDP was initially estimated to have risen at only a 0.7% rate and economy grew at a rate of 2.0% in the third quarter (2.4% for all of 2015), the pace continues a trend that underperforms the historical post-World War II average.

The upward revision was fueled by greater-than-expected consumer spending, which accounts for roughly two-thirds of all GDP. Consumer spending rose at a 2.4% pace rather than the 2.0% rate initially reported last month. Consumption increases came from services. However, corporate profits fell for a second straight quarter.

Profits after tax with inventory valuation and capital consumption adjustments fell by 8.4% annually, which is the steepest drop since the first quarter of 2014. They fell by 1.7% in the third quarter. Profits from current production decreased $159.6 billion after shedding $33.0 billion in the third quarter.

In 2015, profits fell 5.1%, the largest drop since 2008 and followed a 0.6% decline in 2014.

The manufacturing sector, which has shown both regional and national weakness in 2016, as it did in 2015, continues to be disproportionately impacted by global markets and domestic policy. Manufacturing profits declined $139.2 billion during the last quarter after falling $4.1 billion from July to September.