US real GDP growth for Q4 '15 revised to 1.4 pct

WASHINGTON, March 25 (KUNA) — The US Department of Commerce on Friday announced an upward revision of real Gross Domestic Product (GDP) growth for the fourth quarter of 2015 to 1.4 percent compared with only 1.0 percent in a previous estimate.
Domestic demand continued to grow as overall, the most stable and persistent components of output – consumption and fixed investment – rose a solid 2.8 percent during the four quarters of 2015, well above the 2.0-percent GDP growth in 2015, reads the Department of Commerce’s Bureau of Economic Analysis report.
Weaker foreign growth continued to weigh on economic growth, underscoring the importance of policies that open US exports to new markets and promote strong domestic demand.
The rise was attributed to a boost in consumer spending (which rose 2.4 percent at an annual rate) and residential investment (which rose 10.1 percent at an annual rate).
In contrast, investment in structures declined 5.1 percent, as low oil prices have led to a sharp contraction in oil-related investment.
Investment in equipment and in inventories subtracted a combined 0.3 percentage point from GDP growth. Slowing global demand remains the key drag on real GDP growth, with real exports subtracting 0.3 percentage point from GDP growth in the fourth quarter.
Real Gross Domestic Income (GDI) – an income-based measure of output – grew 0.9 percent at an annual rate in the fourth quarter, below the 1.4-percent increase in GDP – an expenditure-based measure of output.
Real GDI growth was weighed down by a decline in corporate profits, which offset part of the solid growth in compensation of employees.
The average of GDP and GDI, which is referred to as Gross Domestic Output (GDO), increased 1.1 percent at an annual rate in the fourth quarter and 1.7 percent during the four quarters of 2015.
In the fourth quarter, nominal compensation of employees rose by USD 98 billion. On the other hand, nominal corporate profits from domestic current production declined by USD 153 billion.
However, over half of the decline in profits (USD 83 billion) was due to a settlement over the 2010 oil spill in the Gulf of Mexico, boosting business transfers to the government by the same amount as it subtracted from profits and having no net effect on overall GDI.
The remaining declines in corporate profits were largely concentrated in the petroleum and coal products industries.
Quarterly profit data can be quite volatile and may not be the best long-run signal. Smoothing through the quarterly changes, real GDI rose 1.4 percent during the four quarters of 2015, in contrast to real GDP’s 2.0-percent growth.
During the four quarters of 2015, real GDP growth slowed to 2.0 percent despite sharp declines in the unemployment rate-a discrepancy that appears to be due largely to slower productivity growth, though GDP measurement issues may also be playing a role.
The pace of the decline in the unemployment rate since 2010 would normally be consistent with annual output growth of roughly 4 percent, while actual annual growth has been closer to 2 percent.
Real Private Domestic Final Purchases (PDFP) – the sum of consumption and fixed investment – contributed 2.3 percentage points to real GDP growth during the four quarters of 2015, underscoring the resilience of domestic demand.
PDFP growth in 2015 remained close to its average pace since 2011, but stepped down some after strong growth in 2014. Government purchases also added 0.2 percentage point to GDP growth in 2015 and inventories – despite sizeable impacts on GDP growth in individual quarters – were neutral for four-quarter GDP growth. (end) sd.ibi