US economic growth revised down for late 2013 as Fed blames weather

Storm Clouds

The US economy grew at a slower rate than initially estimated in late 2013, the Commerce Department said on Friday.

After a healthy spurt the pick-up in US gross domestic product (GDP), the broadest measure of goods and services, started to slow in the last quarter of 2013, the Commerce Department said, cutting its measure to a seasonally adjusted annual rate of 2.4% down from an initial reading of 3.2%.

The revision comes after Janet Yellen, chair of the Federal Reserve, told Congress on Thursday that bad winter weather may explain a recent spate of weak economic reports. Although she added it was too early to assess the full impact of the weather on the economy.

After a slow start to the year the US economy surged in the third quarter, expanding at a 4.1% pace, and shaking off a government shutdown and fights in Washington over the debt ceiling that some economists predicted would stall the recovery.

But in the final quarter the economic recovery slowed again. The Commerce Department’s latest figure includes downward revisions to consumer spending, business investment in inventories, exports, and state and local government spending.

The downward revision to GDP was in line with economists’ forecasts. Dan Greenhaus, chief strategist at broker BTIG, said: “Despite the revisions, the second half of 2013 was still stronger than the first half and we expect 2014 to be stronger than 2013. Today’s data does not change that view and while growth isn’t as great as it might have been, growth appears to still be accelerating and that should be the main takeaway.”

PNC bank chief economist Stuart Hoffman said: “Although the rough winter will be a drag on first quarter growth, the US economy had momentum heading into 2014, and this year will be substantially better than last year. PNC is forecasting first quarter growth of 2.5%, with the weather weighing on sales of consumer durable goods, especially cars, and construction.”

PNC predicts real GDP growth for all of 2014 will be about 2.9%, compared to 1.9% in 2013.

Yellen told lawmakers on Thursday that the Fed was closely watching economic reports as it weighs further cuts in its massive bond buying economic stimulus programme, known as quantitative easing.

Fed officials cut QE’s bond purchases by $10bn to $65bn at their January meeting and plan to wind down the program by year’s end, barring an unexpected slowdown in the economy.

Next week the labour department will release its tally of job gains for February. The last two monthly nonfarm payroll reports have been disappointing. Economists are predicting a gain of around 149,000, well below the 200,000 plus the US added at the end of 2013.

Powered by Guardian.co.ukThis article was written by Dominic Rushe in New York, for theguardian.com on Friday 28th February 2014 15.26 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

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