U.S. economic growth slowed less than previously reported in the fourth quarter amid robust consumer spending that was partially met with a rise in imports.
Gross domestic product increased at a 2.1 percent annualized rate instead of the previously reported 1.9 percent pace, the Commerce Department said on Thursday in its third GDP estimate for the period. There are indications that activity moderated further at the start of 2017.
The government also said that corporate profits after tax with inventory valuation and capital consumption adjustments increased at an annual rate of 2.3 percent in the fourth quarter after rising at a 6.7 percent pace in the third quarter.
Profits were held back by a $4.95 billion settlement between the U.S. subsidiary of Volkswagen and the federal and state governments for violation of environmental regulations.
Data such as trade, consumer and construction spending suggest the economy struggled to regain momentum early in the first quarter. The Atlanta Federal Reserve is forecasting GDP rising at a rate of 1.0 percent in the first quarter.
With the labor market near full employment, the data showing slowing growth likely understates the health of the economy. GDP tends to be weaker in the first quarter because of calculation issues the government has acknowledged and is trying to resolve.
The economy grew at a 3.5 percent rate in the third quarter. It expanded 1.6 percent for all of 2016, its worst performance since 2011, after growing 2.6 percent in 2015.
The economy's sluggish performance poses a challenge to President Donald Trump, who has vowed to boost annual economic growth to 4 percent by slashing taxes, increasing infrastructure spending and cutting regulations. The Trump administration has offered few details on its economic policies.
Economists polled by Reuters had expected fourth-quarter GDP would be revised up to a 2.0 percent rate.
Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised to a 3.5 percent rate in the fourth quarter. It was previously reported to have risen at a 3.0 percent rate.
Some of the increase in demand was met with imports, which increased at a 9.0 percent rate rather than the 8.5 percent pace reported last month. Exports declined more than previously estimated, leaving a trade deficit that subtracted 1.82 percentage point from GDP growth as previously reported.
There was an upward revision to inventory investment. Businesses accumulated inventories at a rate of $49.6 billion in the last quarter, instead of the previously reported $46.2 billion. Inventory investment added 1.01 percentage point to GDP growth, up from the 0.94 percentage point estimated last month.
Business investment was revised lower to reflect a more modest pace of spending on intellectual property, which increased at a 1.3 percent rate instead of the previously estimated 4.5 percent rate. There were no revisions to spending on equipment.
Investment in nonresidential structures was revised to show it falling at a less steep 1.9 percent pace in the fourth quarter. It was previously reported to have declined at a 4.5 percent rate.