The Gross Domestic Product expanded at a 2.2 percent annual rate in the last quarter of 2014, down from the 2.6 percent rate that had earlier been forecast, according to the Commerce Department. The report showed that while the economy continues to expand, the recovery remains a sluggish one.
The economy had grown at a 5 percent pace in the previous quarter, giving rise to hopes that it had finally begun to really accelerate. But a widening trade deficit subtracted 1.15 points from GDP growth.
Growth in consumer spending was less robust than predicted, hitting a pace of 4.2 percent in last quarter, one-tenth of a percentage point below forecasts. Consumer spending accounts for two-thirds of economic activity.
The Commerce Department also downgraded the amount of inventory built up by businesses in the last quarter — $88.4 billion, below projections of $113.1 billion — further dampening growth.
“The deceleration in real GDP growth in the fourth quarter primarily reflected an upturn in imports, a downturn in federal government spending, and decelerations in nonresidential fixed investment and in exports,” the Bureau of Economic Analysis reported.
The slowdown is not expected to prolonged though. The jobs market is tightening — the Labor Department put the number of unemployed actively seeking work at 5.7 percent earlier this month, it’s lowest rate since 2008 — and gas prices remain low, both indicators growth will accelerate this year.
The Commerce Department noted that businesses spending on new equipment grew twice as fast as predicted, from less than to nearly two. with growth in that area rising less than one percent.
The rise in the trade deficit, meanwhile was caused by strong consumer demand bringing in more imports.
