GDP report: Economic growth revised sharply lower

chart_gdp_022511.top.gif By Annalyn Censky, staff reporter


NEW YORK (CNNMoney) -- Budget cuts by state and local governments hurt the economy more than originally thought, according to a government release Friday.

Gross domestic product, the broadest measure of economic activity, was revised lower to an annual growth rate of 2.8% in the three months ending in December. The initial reading had been for a 3.2% growth rate in the period.

That's a surprising dip, given that economists were expecting the rate to be revised upward to 3.3%.

Lower state and local government spending was the main drag, falling 2.4% during the quarter, compared to a 0.9% drop originally reported.

Consumer spending was also weaker than initially reported, and was revised down to a 4.1% growth rate, from 4.4%.

The lower GDP number isn't a reason to be alarmed, economists say.

"It's kind of ancient history, given we're now two-thirds into the first quarter," said Paul Ashworth, chief U.S. economist with Capital Economics. "If anything, we still expect growth to be stronger in the first quarter."

Despite its weaker points, the report still contained a robust reading on domestic demand, and that's encouraging, said David Resler, chief economist with Nomura Securities.

Real final sales of domestic product grew at a rate of 6.7% during the quarter. While that's slightly lower than the 7.1% previously estimated, it's still strong, especially given that the rate stood at a mere 0.9% in the third quarter.

"It's a sign to me that demand has turned a corner in the fourth quarter," Resler said. "The private sector seems to be on a roll here, and we're seeing evidence of that through most other economic indicators."

The government calculates GDP as a measure of goods and services produced in the United States. The number is backward looking and is often revised multiple times. This is the second reading for the fourth quarter. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,828.24 0.49 0.00%
Nasdaq 4,791.63 4.31 0.09%
S&P 500 2,067.56 -5.27 -0.25%
Treasuries 2.19 -0.04 -1.79%
Data as of 10:37pm ET
Company Price Change % Change
Kinder Morgan Inc 41.35 -0.97 -2.29%
Halliburton Co 42.20 -5.14 -10.86%
General Electric Co 26.49 -0.38 -1.41%
Bank of America Corp... 17.04 -0.07 -0.41%
Apple Inc 118.93 -0.07 -0.06%
Data as of 1:02pm ET

Sections

Union-backed demonstrators are protesting outside some Walmart stores Friday, asking the company to pay workers at least $15 an hour. More

From their smartphones, tablets or laptops -- and the comfort of the living room or Thanksgiving dinner table -- Black Friday shoppers could find deals all week that rivaled the in-store doorbusters. More

Natalie's Cakes and More has raised $84,000 through GoFundMe after protests trash store. More

Retailers are promising big deals this Black Friday, but are the savings actually worth the shopping mayhem? Test your deal-sniffing skills. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.