US Economy Boosted By Consumer Spending

US economic growth was higher than expected in the final quarter of 2015.

Gross domestic product (GDP) for the final three months of the year was revised upwards to 1.4% from the 1% initially reported, and against an expected final figure of just 0.7%.

The revised figures published by the Commerce Department show that household spending helped to offset a disappointing performance from businesses in the country, who are feeling the effects of the low price of oil and a strong dollar.

The boost is encouraging news for the country, but is still below the 2% annual growth rate for the July-September quarter.

Consumer spending, which accounts for more than two thirds of economic activity in the US, increased at a pace of 2.4% - above the preliminary figure of 2% which was reported last month.

The good performance is attributed to the rise in employment, which has tightened the labour markets and caused wages to increase.

The low cost of commodities like oil and petrol have also had an effect as households find themselves with more spare money to spend.

An increase in recreational activities and the use of services have particularly contributed to the upward boost.

But the falling oil prices have had the opposite impact on corporations, with profits down 11.5% compared to the same period of 2014 – the biggest annual drop since 2008.

Profits for the year overall were down 5.1%, which is a much bigger decline than the 0.6% drop seen in 2014, and exports were also down at a 2% annual rate.

But despite the weak performance in the business sector the increase in consumer spending could encourage the Federal Reserve to raise interest rates when it meets to make the decision in April.

Last December The Fed voted to raise rates for the first time since June 2006, increasing the rate by 0.25%.