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| U.S.A. |
US financial growth cooled in the fourth quarter as
previously reported and after-tax corporate profits took a hit from a strong
dollar, which could undermine future business spending.
Gross domestic product expanded at a 2.2 percent annual
rate, the Commerce Department said on March 27 in its third estimate of GDP.
That was unrevised from the forecast the government published February.
Businesses throttled back on inventory and equipment
investment, but robust consumer spending limited the slowdown in the pace of
activity. The economy grew at a 5 percent rate in the third quarter.
After-tax corporate profits declined at a 1.6 percent rate
last quarter after at increasing at a 4.7 percent pace in the third quarter.
Corporate profits from outside the United States fell at an 8.8 percent rate,
the steepest decline since the 2007 – 2009 recessions.
“Slower profit growth could mean slower investment in the
coming mothers,” said Thomas Costerg, an economist at Standard Chartered in New
York.
Multinationals such as technology giant Intel Corp,
industrial conglomerate Honeywell and Procter and Gamble, the world’s largest
household products maker, have warned that the dollar will hunt their profits
this year.
The dollar gained 7.8 cents against the currencies of the
main US trading partners between June and December.
For all of 2014, after-tax corporate profits fell 8.3
percent, the largest annual drop since 2008.
Economists had expected fourth-quarter growth would be
revised up to a 2.4 percent rate and after-tax corporate profits would rise at
a 1 percent pace.
US stocks were trading marginally higher, as investors bet
that weaker growth data would delay a Federal Reserve interest rate increase
until later in 2015. The dollar dipped against a basket of currencies, while
prices for US Treasuries rose.
A separate report showed consumer sentiment slipped in March,
adding to signs that the moderate pace of economic expansion persisted through
the first quarter.
The University of Michigan said its consumer sentiment index
fell to 93 this month from a reading of 95.4 in February.
The sturdy dollar, lingering weakness in Europe and Asia,
harsh winter weather in the United States and busy US West Coast ports dampened
activity in the first two months of the year.
With temperatures rising, there are signs of some pick-up in
activity. But the dollar will likely provide a challenge for domestic
manufacturers. First-quarter growth estimates range between a 0.9 percent and
1.4 percent rate.
“The impact of dollar strength and energy price declines may
prove too much for GDP to hit the long-awaited 3 percent threshold in 2015,
leaving another year of mid-2 percent growth in its wake.” Said Jay Morelock ,
an economist at FTN Financial in New York.
Businesses accumulated $80 billion worth of inventory in the
fourth quarter, less than the $88.4 billion the government had estimated February.
As a result, inventories subtracted 0.10 percentage points
from GDP growth in the fourth quarter. Restocking was previously reported to
have added 0.1 percentage points to output.
The weak pace of restocking, however, removes the threat of an inventory overhang, giving business
scope to place more orders for goods, which should help to stimulate
manufacturing.
Business investment in equipment was revised to show it
rising at a 0.6 percent rate instead of the previously reported 0.9 percent
pace, likely reflecting the impact of the strong dollar and lower crude oil
prices, which have caused a drop in drilling and exploration activity.
But consumer spending, which accounts for more than
two-thirds of US economic activity, increased at a 4.4 percent rate in the fourth
quarter instead February.
Consumer spending, however, moderated early in the first
quarter as cold and snowy weather kept shoppers at home. Households also appear
to have opted to save the bulk of their savings from lower gasoline prices.
Despite slower global demand, export growth was revised
higher. But with consumer spending so strong, more imports than previously
estimated flowed into the country, resulting in a trade deficit that weighed on
GDP growth.
Trade lopped off 1.03 percentage points instead
of the 1.15 points reported February
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