US GDP growth hits 2.6 per cent in the final quarter of 2014

Emma Haslett
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The figure is lower than the three per cent analysts had expected (Source: Getty)

US gross domestic product (GDP) growth rose to 2.6 per cent in the final three months of 2014, down from five per cent in the previous quarter.

Although the figure is an estimate, it came in lower than analyst expectations: they had forecast a number closer to three per cent.

The US's official statistics authority said the increase "reflected positive contributions from personal consumption expenditures, private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment".

However, these were offset by a fall in government spending.

Gross domestic purchases, which measures prices paid by US residents, fell 0.3 per cent, in contrast to an increase of 1.4 per cent during the third quarter. Excluding volatile food and energy prices - which include the plummeting price of oil - that figure rose 0.7 per cent, although it was still down from the previous quarter's figure of 1.6 per cent.

Despite the contribution from falling oil prices, the figure hinted that growth could slow further in 2015.

Chris Williamson, chief economist at Markit, said the slowdown suggested that the US economy could be becoming "too reliant on the consumer".

Consumer spending rose at an annualised rate of 4.3% in the fourth quarter but business investment fell at an annualised rate of 1.9%. While the rise in consumer spending was the fastest since the first quarter of 2006, the falling business investment was the biggest since the second quarter of 2009. Ideally, a sustainable economic upturn requires business spending to be rising alongside consumer expenditure. However, the investment data tend to be subject to large revisions, so we should treat the latest numbers with due caution.

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