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| US raises growth estimate for the last quarter of 2015 | US raises growth estimate for the last quarter of 2015 |
| (35 minutes later) | |
| The US economy grew at a faster pace than previously thought in the fourth quarter of 2015, according to the latest official figures. | |
| The US economy grew at an annualised pace of 1% in the quarter, compared with an initial estimate of 0.7%. | The US economy grew at an annualised pace of 1% in the quarter, compared with an initial estimate of 0.7%. |
| Most economists had taken a more pessimistic view, expecting the figure would be revised downwards. | Most economists had taken a more pessimistic view, expecting the figure would be revised downwards. |
| But businesses bought more stock than previously estimated, which meant inventory levels were $13bn higher. | But businesses bought more stock than previously estimated, which meant inventory levels were $13bn higher. |
| The downside is that next month's growth figures may be lower than expected if businesses do get round to cutting back on inventory spending. | The downside is that next month's growth figures may be lower than expected if businesses do get round to cutting back on inventory spending. |
| Some forecasts put the growth rate for the first three months of 2016 as high as 2.5%. | Some forecasts put the growth rate for the first three months of 2016 as high as 2.5%. |
| But Chris Williamson, chief economist at research firm Markit, said: "Unfortunately, the cause of the upward revision bodes ill for the first quarter. | But Chris Williamson, chief economist at research firm Markit, said: "Unfortunately, the cause of the upward revision bodes ill for the first quarter. |
| "The GDP number was revised higher in part due to a bigger than previously thought contribution from inventories, something which often happens due to weaker than expected demand, meaning inventories could act as a drag in the first quarter as excess stocks levels are wound down again." | "The GDP number was revised higher in part due to a bigger than previously thought contribution from inventories, something which often happens due to weaker than expected demand, meaning inventories could act as a drag in the first quarter as excess stocks levels are wound down again." |
| Uncertainty | Uncertainty |
| Consumer spending, which accounts for more than two-thirds of US economic activity, rose at a 2% pace in the fourth quarter, rather than the 2.2% rate previously estimated. | Consumer spending, which accounts for more than two-thirds of US economic activity, rose at a 2% pace in the fourth quarter, rather than the 2.2% rate previously estimated. |
| Cheap oil and lower heating bills from a mild winter has helped consumer confidence. | Cheap oil and lower heating bills from a mild winter has helped consumer confidence. |
| But some economists fear that the slowdown in consumer spending could get worse. | But some economists fear that the slowdown in consumer spending could get worse. |
| Mr Williamson said: "Companies cite a number of worries that are dragging on customer spending and causing business to become more risk averse. | Mr Williamson said: "Companies cite a number of worries that are dragging on customer spending and causing business to become more risk averse. |
| "These include uncertainty about the forthcoming election, financial market volatility, the global economic environment and the possibility of higher interest rates." | "These include uncertainty about the forthcoming election, financial market volatility, the global economic environment and the possibility of higher interest rates." |
| The chair of the US central bank, the Federal Reserve, Janet Yellen has indicated that rates could rise gradually through the year if the economy grows strongly enough. | The chair of the US central bank, the Federal Reserve, Janet Yellen has indicated that rates could rise gradually through the year if the economy grows strongly enough. |
| However, many economists believe US growth will be held back by slowing economies round the world from China to Brazil, pushing down the prices of raw materials and leading to deflation. | However, many economists believe US growth will be held back by slowing economies round the world from China to Brazil, pushing down the prices of raw materials and leading to deflation. |
| For example, lower oil prices have been a drag on the profits of oil companies and a range of oil support industries, leading them to cut spending on investment. | For example, lower oil prices have been a drag on the profits of oil companies and a range of oil support industries, leading them to cut spending on investment. |
| A Reuters survey this month estimated that the top 30 global oil companies had cut their budgets by an average of 40%. | A Reuters survey this month estimated that the top 30 global oil companies had cut their budgets by an average of 40%. |