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US Growth Slows
World Economy

US Growth Slows

US economic growth braked sharply in the fourth quarter as businesses stepped up efforts to reduce an inventory glut and a strong dollar and tepid global demand weighed on exports.
Gross domestic product increased at a 0.7% annual rate, the Commerce Department said on Friday, also as lower oil prices continued to undermine investment by energy firms and unseasonably mild weather cut into consumer spending on utilities and apparel, Reuters reported.
The growth pace was in line with economists' expectations and followed a 2% rate in the third quarter. The economy grew 2.4% in 2015 after a similar expansion in 2014.
But some of the impediments to growth - inventories and mild temperatures - are temporary and the economy is expected to snap back in the first quarter. Excluding inventories and trade, the economy grew at a 1.6% pace.
Nevertheless, the GDP report could spark a fresh wave of selling on the stock market, which has been roiled by fears of anemic growth in both the US and China. In the fourth quarter, businesses accumulated $68.6 billion worth of inventory. While that is down from $85.5 billion in the third quarter, it was a bit more than economists had expected, suggesting inventories could remain a drag on growth in the first quarter.
Consumer spending, which accounts for more than two-thirds of US economic activity, increased at a 2.2% rate. That marked a step-down from the 3.0% pace notched in the third quarter.
The dollar, which has gained 11% against the currencies of the United States' trading partners since last January, likely remained a drag on exports, leading to a trade deficit that subtracted 0.47 percentage point from GDP growth in the fourth quarter.
Investment in mining exploration, wells and shafts fell 35% in 2015, the largest drop since 1986.

 

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