U.S. economic growth likely braked sharply in the fourth quarter as businesses doubled down on efforts to reduce an inventory glut and unseasonably mild weather cut into consumer spending on utilities and apparel. Gross domestic product probably rose at a 0.8 percent annual rate, according to a Reuters survey of economists, also as a strong dollar and tepid global demand hurt exports, and lower oil prices continued to undercut investment by energy firms. The economy grew at a 2 percent pace in the third quarter. Risks to the fourth-quarter GDP forecast are tilted to the downside after a report on Thursday showed a collapse in new orders for long-lasting manufactured goods in December.
But some of the impediments to growth – inventories and mild temperatures – are temporary and the economy is expected to snap back in the first quarter. Nevertheless, the U.S. Commerce Department’s advance fourth-quarter GDP report, to be released on Friday at 08:30 a.m. could spark a fresh wave of selling on the stock market, which has been roiled by fears of anemic growth in both the United States and China. “Given the state of financial markets, fourth-quarter GDP could fuel fears that the expansion is unraveling. This would be misguided as inventories will be a significant weight and trade will also be drag,” said Ryan Sweet, senior economist at Moody’s Analytics in Westchester, Pennsylvania.