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Monday, 1 February 2016

US growth slows sharply

US growth slows sharply

If you are waiting for further interest rate hikes in the US to bring down the Aussie dollar towards 60 cents, it seems that you might be waiting a little while.

The "advance estimate" released by the US Bureau of Economic Analysis on Friday showed that the US economy slowed to a crawl in the fourth quarter to an annualised pace of just 0.7 per cent.

In the third quarter real GDP grew by only 2.0 per cent. 

Soft consumer and business spending were the key inputs, with confidence down reflecting turmoil on global markets.


Charting the real GDP data in dollar terms shows how the recovery, which has now been tracking for six-and-a-half-years, appeared to lose some of its momentum towards the end of 2015, although the economy has continued to record solid employment growth.


Despite the slowdown last year real GDP grew by an estimated 2.4 per cent, around the same level of growth since in the preceding year. 

A number of commentators believe that the fourth quarter slowdown may have been a blip, and then robust growth will return next quarter.

The non-farm payrolls data, which I looked at in a little more detail here, showed that the US economy added 2.65 million jobs in 2015, helping unemployment to fall to 5 per cent.