US economic growth rate revised up to 2.9% in fourth quarter

The US economy expanded at a faster clip in the final quarter of 2017 than initially thought, data on Wednesday showed as consumer spending increased more than previously estimated.

Real GDP increased at an annualised rate of 2.9 per cent in the last three months of last year, the third and final reading from the US Commerce Department showed. That compares to the first two readings of 2.6 per cent and 2.5 per cent and topped analysts’ forecasts for growth of 2.7 per cent.

“The increase in real GDP in the fourth quarter primarily reflected positive contributions from [personal consumption expenditures], nonresidential fixed investment, exports, residential fixed investment, state and local government spending, and federal government spending that were partly offset by a negative contribution from private inventory investment,” said the report.

For the whole of 2017, the US economy grew 2.3 per cent compared to 2016.

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Rate increase

The better-than-expected reading comes just a week after the Federal Reserve raised interest rates 25 basis points and lifted its tightening forecast to include three instead of two rate increases next year.

While the Fed's median projection for the end of this year remained three rate rises, the number of governors expecting four hikes rose to equal the number expecting three. This means four rate hikes this year are now far more likely than they were in the last meeting under Janet Yellen in December.

– Copyright The Financial Times Limited 2018