U.S. economy grew at 2.6 percent pace in fourth quarter of 2014
Lower oil prices, though boon for consumers, also causing wave of cutbacks among major energy companies
WASHINGTON – The U.S. economy slowed its pace of growth between the months of October and December, according to government data released Friday morning, expanding at a 2.6 percent pace that was slightly below market expectations and half the rate of the blowout 5 percent expansion seen in the previous three months.
Still, the fourth quarter pace indicates an economy moving at near full stride and easily outpacing the rest of the developed world — namely Europe and Japan. Not since 2003 and 2004 has the American economy grown so briskly over a nine-month stretch. For 2014, however, the numbers were less of a blowout: The annual gross domestic product grew 2.4 percent, according to the Commerce Department, dragged down by a sharp weather-influenced contraction first three months.
On balance, the GDP numbers from April through December provided a clear signal that the recovery has kicked into a higher gear. Most economists think the momentum will continue: The International Monetary Fund pegs U.S. growth in 2015 at 3.6 percent.
"We certainly have a much better footing than we have had at any earlier point in the recovery," said Dan North, lead economist for Euler Hermes, a credit insurance company.
The GDP numbers for the last quarter of 2014 could still fluctuate, and the data will be reassessed twice more over the next two months.
Data from the latest quarter showed a 4.3 percent bump in consumer spending. That spending accounts for about two-thirds of the GDP, and economists have said that falling oil prices — which translate into cheaper gasoline — amount to a tax break that saves consumers hundreds of dollars annually.
In recent weeks there had been conflicting news about the extent to which consumers were spending that money. Though October and November spending was brisk, retail sales slumped in December, according to earlier data.
Perceptions of the economy always lag behind the real-time shifts, but Americans are changing their views about the nation's direction. Only 24 percent call the U.S. economy "poor," compared with 39 percent a year earlier, according to a Pew Research Center survey conducted earlier this month. President Obama's approval rating has ticked up as a result.
In his State of the Union address, Obama touted the economy, noting that the nation had just wrapped up its best year of job creation in 15 years. "We have risen from recession freer to write our own future than any other nation on Earth," Obama said.
But there is risk for stumbling. The slumping economies from Germany to China figure to drag down global demand. For American workers, wages have remained stubbornly flat. Lower oil prices, though a boon for consumers, are also causing a wave of cutbacks among major energy companies. There's also some concern about the stronger dollar, which hurts U.S. export-dependent companies, whose products are now more expensive overseas.
The Federal Reserve earlier this week sounded an upbeat note about the economy and indicated a midyear short-term rate hike is still a possibility. The Fed said that the country was seeing "solid" growth and "strong" labor market expansion. But the Federal Open Market Committee's statement indicated a wait-and-see approach on the rate hike, with the U.S. economy getting at least a few more months to prove it's on firm ground. The Fed said it will be "patient" in determining when to raise its rates.
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