The fourth quarter figures mean GDP grew 2.0% in 2016, down fractionally from 2.2% in 2015.
Economists expect growth to pick up to about 2.3% this year, partly because of President Donald Trump's proposals to cut taxes and ramp up infrastructure and defense spending.
- The contribution from inventories was +1.00%, more than double the +0.49% growth rate recorded during the prior quarter.
Paul Ashworth, chief USA economist at Capital Economics, said the slowdown in fourth quarter growth was not a cause for concern since the third and fourth quarter performances were heavily influenced by a temporary swing in exports.
Inventory expansion added 1 percentage point to GDP growth, as stockpiles were rebuilt at a $48.7 billion annualized pace following a $7.1 billion rate. The Atlanta Federal Reserve is forecasting the economy growing at a 2.9 percent rate in the fourth quarter. Looking at the year as a whole, business investment fell 0.4% in 2016. Some forecasters have raised their projections for USA growth this year and in 2018 in anticipation of tax cuts and infrastructure spending.
"The deceleration of real GDP in the fourth quarter reflected a downturn in exports, an acceleration in imports. and a downturn in federal government spending", the report said. The rate of growth was unchanged from the previous two quarters. Our trade position remains weak, and is a drag on growth, and there is still the prospect of more austerity to come, especially if the government's tax take declines on the back of financial firms choosing to leave the City.
Ulster Bank's northern chief economist Richard Ramsey described the 2016 growth of 2 per cent as "pretty good", but said it had be boosted by population growth and immigration. So-called core orders increased 2.8% in the fourth quarter, the strongest gain since early 2015. The cutbacks in business investment along with efforts by companies to reduce an overhang of unwanted inventories were major reasons growth slowed in 2016.
Businesses have been reluctant to spend, given the lack of clarity about what the new presidential administration might do in terms of economic policy, trade, government spending, immigration, corporate reforms and regulation, said Bostjancic.
Non-residential investment and residential investment contributed to growth, with gross private domestic investment rising 10.7 percent in Q4, up from 3 percent in Q3. With the rise in GDP in Q4 matching the rates seen in the second and third quarters, 2016 delivered a remarkably stable rise in GDP. The anticipated gain in business investment is likely to be driven by rises in gas and oil well drilling, in tandem with the recovery in crude oil prices.