US economy slowed to scant 0.7 pct. growth rate last quarter

“That affects top-line growth but doesn’t really say so much about the fundamentals of the USA economy”, he added.

“We remain unconvinced that (the slowdown) will develop into a more serious economic downturn”, said Paul Ashworth, chief USA economist at Capital Economics in Toronto.

The fourth quarter real GDP of 0.7 percent, which includes performance from October, November, and December of 2015, was lower than the third quarter real GDP estimate of 2 percent, which included months July, August and September.

A boost this year is expected to come mainly from consumer spending, which typically fuels about two-thirds of economic activity. Plunging oil prices dampened USA economic growth in the last quarter of 2015 but employment growth actually accelerated.

On a relatively encouraging note, consumer spending – a key driver of GDP – continued to expand at a respectable if unspectacular rate: +2.2% in Q4. A decline in net exports, meanwhile, largely reflects the strong dollar and overseas demand. “And a slowdown in China, persistent weakness in Europe and volatile financial markets have been a drag”.

Rob Carnell, Chief International Economist at ING Commercial Banking, said, “All in all, these GDP data support the sense given by recent monthly numbers that the USA economy lost momentum into the end of 2015”.

In the fourth quarter, businesses are forecast to have accumulated between USD 55 billion and USD 65.9 billion worth of inventory, down from USD 85.5 billion in the third quarter. That reflected a 38 percent plunge in spending in the oil and gas industry, which has slashed drilling and exploration in response to the plunge in oil prices.

Besides pulling back on investment, businesses cut spending on stockpiles to try to pare unwanted inventories.

The expansion was slightly weaker than economists’ expectations and was dragged down by a wider trade deficit, which shaved 0.47 percentage points off GDP growth. Federal nondefense spending grew 1.4 per cent and defense spending rose 3.6 per cent. Spending at the state and local level contracted 0.6 per cent.

For the year of 2015, the USA economy gained 2.4% compared to the historic average of 3.3%. For the year, nonresidential fixed investment expanded by 2.9 percent after growing by 6.2 percent in 2014 and 3 percent in 2013.

The widely accepted definition of an economic recession is when a country’s economy experiences two consecutive quarters of negative economic growth as measured by GDP (Gross Domestic Product).

Although there are some challenges ahead and potential risks, the U.S. economy appears set for moderate growth over the next few years according to our latest forecast.

Many voters are considering populist presidential candidates such as Donald Trump on the right and Bernie Sanders on the left who would have stood low odds of success in the days before the Great Recession. The favorable winds from their prior actions helped the economy and stocks to a strong recovery from a bitter recession; these are now headwinds as Wall Street reacts to the weakening of its beloved low interest rate environment. Chinese policymakers have been attempting to deal with situations that must be corrected (such as debt, a bubble in equity prices a year ago followed by major corrections in the fall of 2015 and early 2016, real estate overhang, troubled loan portfolios in major banks, and currency exchange issues) and continue to cause disruptions. Cheaper gasoline and steady job gains weren’t enough to allay a sense of caution in the final months of the year.

The central bank may be reluctant to cut interest rates or banks’ reserve requirement ratios in the near term because of concerns over the impact on the yuan, but it remains under pressure to loosen policy further, policy insiders said.