US fourth quarter economic growth revised higher, boosted by consumer spending

A customer browses at a clothing store in a mall in Waterbury, Connecticut.
A customer browses at a clothing store in a mall in Waterbury, Connecticut. PHOTO: AFP/GETTY IMAGES

WASHINGTON (REUTERS) - US economic growth slowed less than previously reported in the fourth quarter as robust consumer spending spurred the largest increase in imports in two years.

Gross domestic product increased at a 2.1 per cent annualized rate instead of the previously reported 1.9 per cent pace, the Commerce Department said on Thursday in its third GDP estimate for the period. The economy grew at a 3.5 per cent rate in the third quarter.

The government also said that corporate profits after tax with inventory valuation and capital consumption adjustments increased at an annual rate of 2.3 per cent in the fourth quarter after rising at a 6.7 per cent pace in the previous three months.

Profits were held back by a US$4.95 billion (S$6.90 billion) settlement between the US subsidiary of Volkswagen and the US federal and state governments for violation of environmental regulations.

Data on trade as well as consumer and construction spending suggest that economic growth moderated further at the start of 2017. The Atlanta Federal Reserve is forecasting GDP rising at a rate of 1.0 per cent in the first quarter.

With the labor market near full employment, the data likely understate the health of the economy. GDP tends to be weaker in the first quarter because of calculation issues the government has acknowledged and is trying to resolve.

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits fell 3,000 to a seasonally adjusted 258,000 for the week ended March 25.

Claims have now been below 300,000, a threshold associated with a healthy labor market for 108 straight weeks. That is the longest stretch since 1970 when the labor market was smaller.

The economy grew 1.6 per cent for all of 2016, its worst performance since 2011, after expanding 2.6 per cent in 2015. Prices of US government debt fell after the data. US stock index futures pared losses, as did the U.S. dollar against a basket of currencies.