GDP beats on stronger consumer spending

pulse

March 30, 2017 1:12 PM

Personal consumption was stronger than initially thought, and it led the upward revision to growth in the fourth quarter.

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The US economy grew faster than initially reported in the fourth quarter of last year, at a pace of 2.1%, according to the Commerce Department's third estimate.

Economists had forecast that gross-domestic-product growth would be revised to 2% from the second estimate of 1.9%, according to Bloomberg.

Consumer spending was stronger than initially thought, and it led the overall upward revision. Its growth was reported at 3.5%, up from 3%, and it showed improvement in spending on transportation, recreation, and insurance. Consumption is the biggest part of the US economy, and it remained its growth engine late last year amid a steady labor market.

Corporate profits rose by 9.3% year-on-year, the most in four years, partly because of a recovery in the energy sector.

This GDP print is the final reading on fourth-quarter economic growth until annual revisions for all of 2016 are released in July.

It's also the last big piece of economic data that covers Barack Obama's presidency.

President Donald Trump has vowed to return the economy to annual growth above 4%. That will be very difficult to achieve, however, because even after eight years of economic recovery, worker productivity is still quite low. There also isn't enough spare capacity in the labor market to grow by that much. Trump's promise is above the most bullish estimates from the Federal Reserve and the International Monetary Fund, among others.

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