Big increases in goods at warehouses bolstered growth in the middle of 2015. The American economy barely grew last quarter, finishing the year much as it had started and stoking concern about its momentum…
The American economy barely grew last quarter, finishing the year much as it had started and stoking concern about its momentum in 2016.
Over all, the economy expanded at an annual rate of just 0.7 percent in the fourth quarter of 2015, the Commerce Department said Friday.
Little more than a month ago, economists thought growth was running at roughly twice that pace, but data showing tepid business activity, still-sizable inventories and slightly more cautious consumer spending during the holiday season indicated that the economy was likely in the midst of another anemic patch.
Before Friday’s report, analysts had expected to see a growth rate of just under 1 percent. Despite these lackluster numbers for gross domestic product, by other yardsticks the economy looks considerably healthier.
The unemployment rate now stands at 5 percent and most experts forecast that it will keep falling. Employers added an average of nearly 300,000 positions a month in October, November and December.
The real estate market, the principal investment asset for most American families, has also held up well, despite the recent sell-off on Wall Street and turmoil in overseas markets.
And last month, the Federal Reserve raised short-term interest rates for the first time in nearly a decade, a sign that policy makers believe the economy is strong enough to withstand slightly tighter monetary policy over the long term.
On Wednesday, the Fed held off on another interest rate increase after a two-day meeting but in a statement, officials indicated they would weigh another increase when policy makers next meet, in March.
Still, expectations for the coming quarters have been drifting lower as weaker data for the fourth quarter of 2015 has accumulated in recent weeks.
Big business has been noticeably cautious to invest, despite healthy profits in many industries.
The strong dollar and weakness in Asia and Europe have hurt many manufacturers, commodity producers and other exporters, especially in the Midwest.
At the same time, the plunge in oil prices has prompted drastic cuts in spending on energy exploration and production, creating another negative for business.
Steel companies and other manufacturers that supply metal pipe and other equipment to drillers have also been feeling a sharp chill as oil prices dived below $30 a barrel earlier this month. Crude has rebounded slightly, and the American benchmark now stands at about $33.50 a barrel.
One mystery for economists has been why lower oil prices haven’t done more to stimulate growth, especially among consumers.
One explanation is that Americans are saving a substantial portion of the windfall at the gas pump or using it to pay down debt, which ultimately benefits the economy even if it represents a drag in the short term.
Another possibility is that consumers remain skeptical about how long gasoline prices will stay below $2 a gallon on average, the lowest they have been since the depths of the financial crisis in late 2008.
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