The U.S. economy expanded by 2.2 percent in the fourth quarter, after it recorded the biggest gain in consumer spending in the last eight years.
According to a report issued Friday in Washington, the new increase in gross domestic product, as the value of all services and goods, matched the Commerce Department’s previous estimate. The report also revealed corporate profits dipped in the last three months of the year, in what is the the worst annual performance since the recession.
Businesses decreased inventory and equipment investment, but high consumer spending limited the slowdown in the pace in the fourth quarter. The economy grew at a 5 percent rate in the third quarter.
After-tax corporate profits dipped $57.1 billion, which is the biggest drop since the first quarter 2011. In the third quarter, the figure rose by $52.4. Corporate profits from outside the U.S. also decreased $36.1 billion after gaining $16.5 billion in the previous quarter.
Multinationals such as IBM or Intel Corp, but also Honeywell and Procter & Gamble, have experienced profit decreases this year due to a strong dollar. The U.S. currency gained 7.8 percent against its main competitors between June and December.
Weak profits could hurt business spending on hiring and equipment. Profits fell 8.3 percent for all of 2014, the largest annual drop since 2008.
After the report was released, the U.S. dollar hit a session low against the yen and pared gains against the euro.
A small inflation and the slower economic growth could prompt the Federal Reserve to delay raising its short-term lending rate, which it had kept near zero since December 2008. Fed officials lowered growth estimates for this year last week.
The powerful dollar, combined with the weakness of currencies in Europe and Asia, but also severe winter weather in the United States has slowed activity in first two months of the year.
As temperatures rise, there are signs of a speeding up in activity, but the dollar will still be a challenge for domestic manufacturers.
Businesses gathered $80 billion worth of inventory in the fourth quarter, less than the $88.4 billion estimate. Business investment on equipment was also rising at a smaller 0.6 percent rate, compared to a previous announced 0.9 percent pace.
The slower rate of growth in equipment spending most likely reflected the lower crude oil prices, which caused a decrease in exploration and drilling activity.
Consumer spending, which accounts for more than 65 percent of U.S. economic activity, increased at a 4.4 percent rate in the fourth quarter, 0.2 percent more than it was announced last month – the fastest pace since the first quarter of 2006.
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