US economy grew at 2.1 percent rate in Q4

Wall Street futures are pointing to a lower start

Gross domestic product in the USA increased by more than previously estimated in the fourth quarter of 2016, according to a report released by the Commerce Department on Thursday.

The Commerce Department reports that for all of 2016, real gross domestic product (GDP) increased 2.0%, compared with an increase of 1.9% the previous year. The economy grew at a 3.5 per cent rate in the third quarter.

Trade reduced GDP by 1.82 percentage points in the fourth quarter after contributing 0.85 percentage points in the third quarter.

Profits were dragged down by a settlement of $4.95 billion between the Volkswagen U.S. subsidiary and state and federal governments for its violation of regulations related to the environment.

The government attributed the upward revision in fourth quarter GDP to higher than expected consumer spending in the October-December period. Economists had expected the pace of GDP growth to be upwardly revised to 2.0 percent.

With the labor market near full employment, the data showing slowing growth likely understates the health of the economy.

The GDP is usually weaker during the first quarter each year due to issues with calculation the government has said and is attempting to resolve.

Claims have now been below 300,000, a threshold associated with a healthy labour market for 108 straight weeks. The economy grew 1.6 percent for all of 2016, its worst performance since 2011, after expanding 2.6 percent in 2015.Prices of US government debt fell after the data. US stock index futures pared losses, as did the USA dollar against a basket of currencies.

The economy's sluggish performance poses a challenge to President Donald Trump, who has vowed to boost annual economic growth to 4 percent by slashing taxes, increasing infrastructure spending and cutting regulations. The general picture of economic growth remains the same. Its growth was reported at 3.5%, up from 3%. Along those lines, the contribution to GDP from net exports slipped back into negative territory in the fourth quarter for the first time in 2016, subtracting 1.81 percentage points to the headline number.

There was an upward revision to inventory investment. Businesses accumulated inventories at a rate of $49.6 billion in the last quarter, instead of the previously reported $46.2 billion. This is up from the second estimate of 1.9%, and from the third quarter's growth rate of 3.5%.

The best news within the report was a revision higher to personal spending, says Kevin Giddis of Raymond James. Investment in nonresidential structures was revised to show it falling at a less steep 1.9 per cent pace in the fourth quarter.

Exports fell 4.5%, more than the prior 4% estimate, while imports grew faster than believed at 9%, widening the nation's trade deficit.