WASHINGTON – Real gross domestic product expanded 2.8% at an annual rate in the fourth quarter, revised sharply lower from the initial estimate of 3.2% growth released last month, as consumer spending and government spending were revised down, the Commerce Department reported Friday.
Consumer spending, which accounts for about 70% of GDP, increased 4.1% for the quarter ending Dec. 31. Revised retail sales data for November and December dragged the sector lower from the initial estimate of a 4.4% gain.
State and local government spending was also revised lower based on the latest construction spending figures. Spending by state and local governments fell 2.4% in the fourth quarter, revised down from a 0.9% drop initially reported.
The smaller fourth quarter brought down GDP growth for all of 2010. The U.S. economy expanded 2.8% in 2010, down from the 2.9% growth estimated last month, but still the largest annual GDP gain since 2005.
Personal consumption expenditures, excluding food and energy goods, increased 0.5% for the quarter, revised up from a 0.4% rise reported last month. The fourth quarter core PCE growth, which matched a 0.5% increase in the third quarter, is still a record low dating back to 1959.
Economists expected GDP to increase 3.3% for the quarter and for core PCE to gain 0.4%, according to the median estimate from Thomson Reuters.
The U.S. trade balance added to GDP growth in the fourth quarter for the first time in a year. But fourth-quarter imports were revised higher from the initial estimate, limiting the contribution from trade to GDP growth. The trade deficit for the quarter was revised to $493.0 billion from $492.2 billion reported last month.
Businesses paused their inventory restocking in the fourth quarter. The change in private inventories subtracted 3.70 percentage points from GDP growth, the first subtraction in 15 months. It was unrevised from the initial fourth quarter estimate.
Business investment fell 22.1% in the fourth quarter, revised slightly higher from the 22.5% decline initially reported.
