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The government slashed its estimate for U.S. economic growth largely because of weaker-than-expected holiday season sales and lower exports.
Gross domestic product expanded at a 2.4 percent annual rate in last year's fourth quarter, the Commerce Department said on Friday. That was down sharply from the 3.2 percent pace reported last month and the 4.1 percent logged in the third quarter. Economists polled by Reuters had expected growth would be cut to a 2.5 percent pace.
It is not unusual for the government to make sharp revisions to GDP numbers, as it does not have complete data when it makes its initial estimates. In fact, the latest figures will be subject to revisions next month as more information is received. The revision left GDP just above the economy's potential growth trend, which analysts put somewhere between a 2 percent and 2.3 percent pace.
Consumer spending. which makes up about two-thirds of U.S. economic activity, accounted for a large chunk of the revision after retail sales in November and December came in weaker than assumed, the department said.
The loss of momentum appears to have spilled over into the first quarter of this year, with an unusually cold winter weighing on retail sales, home building and sales, hiring and industrial production.