US Economic Growth Slows To 2.6% Annual Rate

US economic growth slowed in the final quarter of 2014 though the performance was enviable when compared to new woes for the eurozone and Russia.

It was confirmed on Friday that the fastest pace of US consumer spending since 2006 was offset by lower business spending and a wider trade deficit in the three months to December.

The annualised measure for the period came in at 2.6% – meaning gross domestic product (GDP) rose 2.4% for 2014 as a whole – only behind that of Britain in the major industrialised economies.

Consumer spending, which accounts for more than two-thirds of US economic activity, advanced at a 4.3% pace in the fourth quarter – they key holiday season for retail.

Improved jobs and wage figures, coupled with a 43% fall in gasoline prices since June, have meant that Americans have more to spend.

The strong pace of consumer spending was overshadowed by a drop in capital expenditure.

Business spending on equipment fell at a 1.9% rate – the largest contraction since the second quarter of 2009 – possibly reflecting cutbacks in the oil industry given the plunging prices.

Economists did not see a connection to world economic weaknesses denting confidence.

The growth figures were released as other economic developments highlighted pressures facing much of the rest of the world.

It emerged that negative inflation deepened in the struggling eurozone last month.

Price growth was measured at an annual rate of -0.6% amid the crash in oil values, which is actually expected to support economic activity ahead of the European Central Bank’s €1.1tn quantitative easing programme starting in March.

The central bank action is aimed at halting a slide towards deflation – an entrenched period of falling prices, which tends to put consumers and businesses off making purchases in case they can secure goods and services cheaper, later.

Russia’s reliance on its oil revenues – coupled with the impact of western sanctions over Ukraine – is set to tip the country’s economy into recession.

Its central bank confirmed on Friday that such was its concern about its economic outlook, it would cut its core interest rate from 17% to 15%.

It was moved to the higher rate just late last year to try and shore up the rouble, which has dived in value against the dollar, and prevent inflation soaring out of control.

US Economic Growth Slows To 2.6% Annual Rate