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3/25/2016 9:00:00 AM Write a Letter to the Editor Write a letter to the Editor

Economy Grew 1.4% in Fourth Quarter, Supported by Consumers

Craig Warga/Bloomberg News

The U.S. economy grew in the fourth quarter at a faster pace than previously estimated, supported by stronger household spending that is helping cushion the expansion from weakness overseas.

The revised 1.4% increase in gross domestic product, the value of all goods and services produced, compares with the Commerce Department’s previous estimate of 1%, according to figures issued March 24. The economy grew 2% in the third quarter. The report also showed that corporate profits dropped in 2015 by the most in seven years.

The earnings slump illustrates the limits of an economy struggling to gather steam at the start of this year. Some companies, encumbered by low commodities prices and sluggish foreign markets, are cutting back on investment while a firm labor market and low inflation encourage households to keep shopping.

“It’s really U.S. consumers who are powering the global economy forward at this point,” said Gus Faucher, an economist at PNC Financial Services Group Inc. in Pittsburgh. At the same time, “there are pressures on businesses in terms of the stronger dollar, rising labor costs and slowing productivity growth” even as a rise in energy prices will help ease that drag for oil producers.

The median forecast of 73 economists surveyed by Bloomberg News called for fourth-quarter growth of 1%, with projections ranging from no change to a 1.4% gain. This is the last of three estimates for the quarter before annual revisions in July.

The figure marks a slowdown from the 2.2% average pace in the first three quarters of 2015. For all of last year, the U.S. economy grew 2.4%, matching the advance in 2014.

The fourth-quarter growth figure reflected more spending on services, particularly on recreation and transportation. Exports also declined less than previously estimated.

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By Michelle Jamrisko

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