US Economy Outperforms Fourth Quarter Expectations

The American economy outpaced previous growth projections for the fourth quarter of 2015, growing by 1.4 percent in the final quarter. Revised growth data was released on Friday.

Previously, the fourth quarter growth for the US economy was expected to reach only 1 percent. The substantially increased growth has been attributed to increased consumer spending. This increase in spending may have been a positive side-effect of the low inflation rates that the Federal Reserve has worked diligently for the past several years to push back up. A job market that, after many years of sluggish growth, is finally beginning to make appreciable gains has been pegged as another major contributing factor.

While individuals and families seem to have found a degree of economic stability that allows for non-essential consumer spending, the positive growth has not translated into increased profits for American companies. While the American economy grew by 1.4 percent in the fourth quarter, corporate profits decreased by 3.1 percent, the worst slide since the financial crisis of 2008. The commodity price collapse of 2015, a strong dollar and weak export markets have combined to make it difficult for American companies to successfully profit from global strategies.

Only two days before the new growth data was released, the Federal Reserve announced that it would be preparing for another interest rate hike. The reserve has been gradually bringing interest rates up from their artificially lowered points, despite criticism from some sectors that rising interest rates could damage securities markets. However, many economic experts have repeatedly stated that prolonged periods of interest rates being held artificially low could have long term consequences down the road, with some even suggesting that such programs could be setting the stage for the world’s next economic recession.

Precisely when the next rate increase, the first of two planned for 2016, will take place is not yet known. Though hopes are high for a recovery of commodity prices later in the year, it may be some time before the global export market for American goods recovers, allowing manufacturers to regain some of the profit losses of 2016. An increase in oil prices, though it could stimulate growth in the energy sector, may also hamper consumer spending, as low gasoline prices have freed up much additional income for American domestic consumers.