U.S. economic growth slowed more sharply than previously estimated in the fourth quarter, according to fresh data released by the Commerce Department’s Bureau of Economic Analysis. Gross domestic product (GDP) expanded at an annualized rate of just 0.5%, revised down from the earlier estimate of 0.7% and significantly below the initial projection of 1.4%. The downgrade was largely attributed to weaker business investment, particularly in intellectual property products, as well as slower inventory accumulation.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was also slightly revised downward to a 1.9% growth rate from the previously reported 2.0%. Economists had expected no revision to the GDP estimate. The slowdown follows a strong 4.4% growth pace in the third quarter, with last year’s government shutdown cited as a key contributing factor. A closely watched measure of domestic demand—final sales to private domestic purchasers—rose at a 1.8% rate, slightly below earlier estimates and down from 2.9% in the previous quarter.
Despite the weaker growth figures, corporate profits showed a strong rebound, increasing by $246.9 billion in the fourth quarter compared to a $175.6 billion rise in the previous quarter. On the income side, the economy grew at a 2.6% rate, while the average of GDP and gross domestic income—considered a more balanced measure of economic activity—rose at a 1.5% pace. While early indications suggest growth may have improved in the first quarter, ongoing geopolitical tensions, including the U.S.-Israeli conflict involving Iran, continue to cast uncertainty over the economic outlook.
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