GDP rises 0.7% in 4th quarter

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Consumer spending slowed as warm weather cut into sales of clothing and demand for heating. Fred Katayama reports.

GDP rises 0.7% in 4th quarter

The U.S. economy sputtered in the fourth quarter. Growth slowed to an annual rate of 7/10th of one percent. Despite the huge drop in gas prices, consumer spending fell from the previous quarter. The unusually warm weather translated into softer sales of clothing and weaker demand for heating. Consumer spending accounts for a big portion of economic activity.

Dragging economic growth: businesses spent less on buildings and equipment and inventory. The huge drop in oil prices particularly slammed spending on mining exploration and wells. And the strong dollar hurt exports.

Allianz chief economic adviser Mohamed El-Erian:


“It’s in line with expectations. Some people were worried it could be as low as zero, so good news it’s not that low, but it tells you we are still struggling to sustain high growth.”

In the fourth quarter, the Fed raised interest rates for the first time in nearly a decade. But investors have been selling stocks, worried about a global slowdown. Even so, the U.S. economy is expected to bounce back in the current quarter because some of the roadblocks like inventories and mild weather are temporary.

Tags : Quarter, 07, rises

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