US economic slowdown may be less severe than previously thought
New figures revising economic growth upward suggest US economy may be able to withstand a global slowdown better than many economists anticipated
The recent economic slowdown in the US may have been less severe than previously estimated, according figures released by the Commerce Department on Friday.
US gross domestic product (GDP) increased by 1% in the fourth quarter of 2015, up from initial estimates of 0.7%. The upward revision surprised economists and analysts who had expected the figure to be revised down to 0.4%, helping to lift stocks in early trading.
The new figures suggest the US economy may be able to withstand a global slowdown better than many economists anticipated despite problems in the once booming shale oil industry.
The revised figures could give the Washington policymakers stronger footing to continue to tighten monetary policy even as central banks in Europe and Japan loosen monetary policy in an effort to boost economic growth.
It comes as the International Monetary Fund (IMF) warned earlier this week that it is “likely” to further cut its global growth forecasts. Just last month the IMF cut the growth forecast from 3.6% to 3.4%.
“Global activity has slowed unexpectedly at the end of 2015, and it has weakened further in early 2016 amid falling asset prices,” the IMF said.
The US GDP data suggests a strong jobs market and still rising US house prices are providing an offset to weak growth overseas. However the overall picture is problematic: the revised figures for fourth quarter growth were still lower than the 2% achieved in the third quarter and 3.9% in the second.
“News that the US economy showed signs of stalling in February has been swiftly followed by a confirmation of weak economic growth late last year,” said Chris Williamson, chief economist at financial data provider Markit. “The recent clutch of disappointing data raises worries that the US economy is slowing sharply, wrong-footing policymakers who decided to hike interest rates for the first time in almost a decade late last year.”
First-quarter GDP growth estimates are as high as a 2.5%, but the risks are tilted to the downside amid slowing world economies, a strong dollar and a recent global stock market sell-off that has tightened financial market conditions.