Yellen Congress
J. Scott Applewhite/APFederal Reserve Chair Janet Yellen testifies before the Senate Banking Committee on Thursday. The central bank will be watching to see whether the slowdown in job growth and consumer spending is just a temporary blip caused by severe winter weather, she said.
By Lucia Mutikani

WASHINGTON -- The U.S. government slashed its estimate for fourth-quarter growth as consumer spending and exports were less robust than initially thought, suggesting some loss of momentum heading into 2014.

Gross domestic product expanded at a 2.4 percent annual rate, the Commerce Department said Friday. That was down sharply from the 3.2 percent pace reported last month and the 4.1 percent logged in the third quarter.

Economists polled by Reuters had expected growth would be cut to a 2.5 percent pace.

It is not unusual for the government to make sharp revisions to GDP numbers, as it does not have complete data when it makes its initial estimates. In fact, the latest figures will be subject to revisions next month as more information is received.

The revision left GDP just above the economy's potential growth trend, which analysts put somewhere between a 2 percent and 2.3 percent pace. Even with the revision, the second-half growth pace was a stellar 3.3 percent and a jump from 1.8 percent in the first six months of the year.

Consumer spending accounted for a large chunk of the revision after retail sales in November and December came in weaker than assumed.

Consumer spending was cut to a 2.6 percent rate, still the fastest pace since the first quarter of 2012. It had previously been reported to have grown at a 3.3 percent pace.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, contributed 1.73 percentage points to GDP growth, down from the previously reported 2.26 percentage points. As a result, final domestic demand was lowered two-tenths of a percentage point to a 1.2 percent rate.

The loss of momentum appears to have spilled over into in the first quarter of 2014, with an unusually cold winter weighing on retail sales, home building and sales, hiring and industrial production.

Temporary Soft Patch

The Federal Reserve, which has been cutting back on the amount of money it injects into the economy through monthly bond purchases, views the recent soft patch as temporary.

Fed Chair Janet Yellen told lawmakers Thursday that the cold weather had played a role in the weakening data.
She said, however, that it would take a "significant change" to the economy's prospects for the Fed to suspend its plans to wind down its bond buying.

Despite the first quarter's weak start, economists remain optimistic that growth this year will be the strongest since the recession ended almost five years ago. For all of 2013, the economy grew 1.9 percent.

An uptick in inflation also accounted for the downgrading of GDP growth in the fourth quarter. A price index in the GDP report rose at a 1 percent rate, instead of the previously reported 0.7 percent rate.

A core measure that strips out food and energy costs increased at a 1.3 percent rate, revised up from a 1.1 percent pace.

Trade weighed on fourth-quarter revisions as well, after a fall in exports in December resulted in a bigger trade deficit in the fourth quarter than the government had initially assumed.

Trade's contribution to growth was lowered to 0.99 percentage point from 1.33 percentage points. It was still the largest contribution to GDP growth since late 2010.

Inventories, previously reported to have risen by $127.2 billion in the fourth quarter, were revised down to $117.4 billion. The rise in the stocks of unsold goods was still the largest since early 1998 and followed a gain of $115.7 billion in the third quarter of 2013.

The contribution to growth from inventories, which the government put at 0.42 percentage point a month ago, was revised down to only 0.14 percentage point. Excluding inventories, the economy grew at a 2.3 percent rate, revised down from a 2.5 percent pace.

Government spending was also revised down, but the impact was offset by upward revisions to investment in residential construction, nonresidential structures and business spending on equipment.

Q4 GDP in Line with Expectations

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didn't she blame the weather?
to me, the weather causes lots of spending to improve the economy.
spending on heat, spending on snow removal and road treatments, spending on fixing potholes, buying new cars after they've crashed. there is way more spending in the winter than at other times of the year. the economy should be booming if our economy is based on spending and debt, which it is.

March 01 2014 at 7:00 PM Report abuse -1 rate up rate down Reply

scorched face, a mental patient scorched from too many electroshock therapy sessions.

Are you still using your EBT card to floss your two front teeth ?


Did you find a job yet?

February 28 2014 at 9:43 PM Report abuse rate up rate down Reply

Shouldn't the 4th quarter be the best, with Christmas and all that?
I guess everything isnt all peachey afterall. HaHa

February 28 2014 at 10:17 AM Report abuse +4 rate up rate down Reply

U.S. Economy Lost Momentum in Fourth Quarter.....

Oh - only in the fourth quarter.

LOL !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

February 28 2014 at 9:37 AM Report abuse +3 rate up rate down Reply
1 reply to createidea's comment

Yeah, the economy sucks compared to 2008. I miss W.

Like a hole in the head.

February 28 2014 at 10:34 AM Report abuse -5 rate up rate down Reply
1 reply to Mitch's comment

republicans can't seem to remember 5 years ago when bush was losing 750,000 jobs a month every month.

March 03 2014 at 9:18 AM Report abuse rate up rate down