Economic growth unexpectedly slowed sharply in the fourth quarter of last year to a modest 2.6% annual rate after a strong six-month stretch raised hopes the U.S. recovery finally was accelerating toward normal.
The data released Friday by the Commerce Department came in well below analyst expectations but still indicated the economy was growing at a solid pace as many nations around the world continue to struggle in the wake of the Great Recession.
But growth from October through December was well off the breakneck pace set from spring through fall. The U.S. economy grew at a 5% annual rate in the third quarter and a 4.6% rate in the second quarter.
The combined growth rate in those six months was the best since 2003.
Friday's data were the government's first estimate for the quarter and the figure could be revised in the coming weeks.
The fourth-quarter slowdown meant the economy expanded at a 2.4% rate last year, a slight improvement over the previous year's 2.2% rate and the best performance since 2010. Growth last year was dragged down by a 2.1% contraction in the first quarter caused by severe weather in much of the country.
Plunging oil prices boosted consumer spending in the fourth quarter to its highest level since 2006. Consumer spending increased at a 4.3% annual rate, up from a strong 3.2% in the third quarter.
But the rising value of the dollar against other currencies caused export growth to fall for the second straight quarter.
The pace of growth of business investment also slowed, to 1.9%. And government spending declined at an annualized rate of 2.2%, led by a steep decline in federal defense outlays.
If wage growth doesn’t pick up, it could damper consumer views of the economy.
“Consumers have now turned to wages rather than jobs as the primary characteristic they use to judge the performance of the economy,” University of Michigan economist Richard Curtin said.
Times staff writer Andrew Khouri contributed to this report.