Weak Business Spending Restrains US Economy; Domestic Demand Robust

• U.S. economic growth slowed in the fourth quarter as a strike at Boeing, contributed to depressing business investment, but robust consumer spending probably keeps the Federal Reserve on a slow interest rate cut path this year.
• Gross domestic product increased at a 2.3% annualised rate last quarter after accelerating at a 3.1% pace in the July-September quarter, the Commerce Department's Bureau of Economic Analysis said in its advance GDP estimate.
• The moderation in growth last quarter reported by the Commerce Department on Thursday was also because inventories at businesses were run down, underscoring the strong domestic demand.
• Furthermore, inflation warmed up last quarter, with the personal consumption expenditures (PCE) price index, excluding food and energy, rising at a 2.5% rate compared to a 2.2% pace in the third quarter.
• Additionally, the Fed on Wednesday left its benchmark overnight interest rate in the 4.25%-4.50% range, having reduced it by 100 basis points since September. It has forecast only two rate cuts this year, down from the four it had projected in September, when it embarked on its policy easing cycle.
• That reflected uncertainty about the economic impact of fiscal, trade and immigration policies from the new Trump administration. Economists view the planned tax cuts, broad tariffs on imports and mass deportations of undocumented immigrants as inflationary. They expect economic growth to falter by the second half and inflation to rise.

(Source: Reuters)