Economic Growth for Fourth Quarter Revised Up

Economic growth for the United States slowed down less than what was reported previously during the fourth quarter amidst strong spending by consumers that was met partially with an increase in imports.

The gross domestic product or GDP increased at an annualized rate of 2.1% rather than the 1.9% that was previously reported, said the Commerce Department on Thursday. The adjustment was the third estimate of the GDP for the final quarter of 2016.

Indications are that activity moderated further during the start of this year.

The government announced as well that corporate profits following taxes with capital consumption and inventory valuation adjustments increased to an annual rate of just over 2.3% during the fourth quarter. That came after an increase of 6.7% during the third quarter.

Profits were dragged down by a settlement of $4.95 billion between the Volkswagen U.S. subsidiary and state and federal governments for its violation of regulations related to the environment.

Data such as consumer and construction spending and trade suggest that the economy struggled as in its attempt to regain momentum during the early part of the first quarter.

The Federal Reserve in Atlanta has forecasted that the GDP will rise at an annualized rate of 1% during the 2017 first quarter.

With the U.S. labor market close to what is considered full employment, data that shows slowing growth is likely understating the health of the U.S. economy.

The GDP is usually weaker during the first quarter each year due to issues with calculation the government has said and is attempting to resolve.

The economy expanded at a rate of 3.5% during the 2016 third quarter, and expanded by 1.6% for the full year of 2016, which was its worst performance in 5 years, after growing in 2015 by 2.6%.

The sluggish performance of the economy creates a challenge to current President Donald Trump who vowed to increase economic growth to 4% annually through tax cuts, increased spending on infrastructure and loosening regulations.

Economists expected the GDP for the fourth quarter to be revised upward to a rate of 2%.

Growth in spending by consumers, which represents over two-thirds of the economic activity in the U.S., was given a revision to 3.5% during the fourth quarter. Previously, it had been increased to 3%.

Some increase in demand was due to imports, which were up by 9% instead of the 8.5% increase that was reported in February.