US real gross domestic product (GDP) increased an annualised 2.6% in the fourth quarter of 2014, according to the “advance” estimate released Friday by the Bureau of Economic Analysis. In the third quarter, real GDP increased 5.0%. For the full year 2014, real GDP rose 2.4% after rising 2.2% in 2013.
While consumer spending rose at the fastest pace since 2006, exports and investment growth slowed.
Exports slowed and imports rose reflecting the strong dollar and demand for items such as iPhones. Meanwhile, a recent durable goods report showed the fourth straight monthly decline in orders for a key category of capital goods.
Government activity subtracted 0.4% from GDP.
In a separate report, the employment-cost index, a broad measure of wage and benefit expenditures, rose a seasonally adjusted 0.6% in the fourth quarter, the Labor Department said Friday, down from 0.7% in the two earlier quarters.
Wages and salaries, which account for about 70% of compensation costs, rose 0.5%, a slowdown from the third quarter’s 0.8% pace. Benefit costs rose 0.6%, matching the prior quarter.
The Dow Jones Industrial Average dropped 251.90 points, or 1.4%, to 17164.95. The Standard & Poor’s 500 fell 26.26 points, or 1.3%, to 1994.99. For the month, the Dow lost 3.7% and the S&P 500 fell 3.1%.
Fourth-quarter GDP highlights: The increase in GDP in the fourth quarter reflected the following:
- Consumer spending increased 4.3%, compared with 3.2% in the third quarter. Spending on both goods and services increased in the fourth quarter;
- Inventory investment rose, notably by wholesale trade industries and manufacturing industries;
- Exports of goods and services increased; foods, feeds, and beverages was the largest contributor;
- Business investment also increased, mainly in intellectual property products. In contrast, imports, a subtraction in the calculation of GDP, increased.
Gross domestic purchases prices: Prices of goods and services purchased by US residents decreased 0.3% in the fourth quarter, after increasing 1.4% in the third quarter. Energy prices declined sharply in the fourth quarter. Excluding energy and food, prices increased 0.7% in the fourth quarter and 1.6% in third quarter:
Personal income and personal saving: Real disposable personal income—personal income adjusted for taxes and inflation—rose 3.8% in the fourth quarter after rising 2.0% in the third quarter. Personal saving as a percentage of disposable personal income was 4.6% in the fourth quarter.
Annual GDP change: The increase in GDP for 2014 reflected the following:
- Consumer spending increased; spending on both services and goods increased.
- Business investment increased, notably in equipment and structures.
- Exports of goods increased.
Prices of goods and services purchased by US residents increased 1.4% in 2014 after increasing 1.3% in 2013.