US economic growth slows in Q4

The United States economy lost momentum in the final three months of 2016 as a downturn in exports temporarily depressed activity. But there were hopeful signs in housing and business investment that the economy will rebound in the coming months.

The gross domestic product grew at an annual rate of just 1.9 per cent in the October-December period, a slowdown from 3.5 per cent growth in the third quarter, the Commerce Department reported Friday. GDP, the broadest measure of economic health, was held back by a swing in trade with exports of soybeans plunging in the fourth quarter after having surged in the third quarter.

"If you smooth out the volatility in soybeans, you get growth of around 2.5 per cent in the two quarters," said Nariman Behravesh, chief economist at IHS Markit. "We really didn't have a slowdown at the end of the year."

For all of 2016, the economy grew 1.6 per cent. It was the worst showing in five years since a similar 1.6 per cent gain in 2011. GDP grew 2.6 per cent in 2015, and since the recession ended in mid-2009, growth has averaged a weak 2.1 per cent.

But analysts believe there were signs in Friday's report of a rebound in business spending and housing activity, which could lead to stronger growth in 2017 of around 2.5 per cent.

For the fourth quarter, the biggest factor contributing to the slowdown was a widening in the trade deficit. Exports, which had been temporarily bolstered by a surge in sales of soybeans to Latin America, retreated in the fourth quarter. Meanwhile, imports surged.

Trade cut 1.7 percentage points from growth in the fourth quarter after adding 0.9 percentage point to growth in the third quarter. A higher trade deficit subtracts from economic growth because it means more production is being supplied from abroad.

- AP