Fourth Quarter GDP Results Revised Downward, Inflation Revised Up

Revised government data on Thursday showed that the U.S. economy experienced a slower growth rate and that inflation was higher than originally estimated for the fourth quarter last year.

According to the Commerce Department’s figures, the economy grew by 2.7 percent annually in inflation adjusted terms during the October-December period. second estimate Gross domestic product. The economy was growing at a rate of 2.9 percent according to the previous estimate.

A large downshift in consumer spending estimates was responsible for the revision. Consumer spending is now only expected to grow at 1.4%, as opposed to the original estimate of 2.1% annual growth.

The decrease in spending could reflect changes in American households’ end-of the-year spending habits. Holiday shopping has shifted to earlier in the year, with many consumers buying holiday gifts as early as September—which falls in the third quarter of the year.

However, consumer spending may be on the rise. Retail sales were up in January above expectations The labor market indicators are extraordinarily strong with low jobless claims Running Despite being historically low, there are still job opportunities Expanding to 11 MillionThis is the result of unemployment dropping to its lowest level in decades and payrolls falling expanding by a blisteringly hot half-a-million in Janury. Inflation accelerated in January after a reprieve in November and December.

The signs of renewed economic momentum have forced investors and analysts to rethink their expectations for inflation and monetary policy. Market indicators now show the Fed is expected to raise its benchmark rate by three-quarters of a point, up from the half a point expected at the start of the year. Simiarly, expectations for a recession have been pushed back from the first half of this year into the second half.

The Commerce Department also revised up its estimate of business investmentto a 3.7 percent pace from the previous estimate of 1.4 percent.

The estimate for the personal consumption expenditure price index, a measure of inflation used by the Fed in its forecasts and its two percent target, was revised up from 3.2 percent to 3.7 percent. Core prices, which exclude food and energy, are estimated to have risen 4.3 percent, up from the earlier estimate of 3.9 percent.