US Economic Growth Slows After Rate Rise

The US economy slowed sharply in the final quarter of 2015 to achieve annualised growth of just 0.7% after spending by consumers and businesses eased.

The figure - announced by the US Commerce Department - was weaker than had been expected by analysts and economists who were largely forecasting a rise of 0.9%.

It (Other OTC: ITGL - news) meant gross domestic product (GDP) for 2015 as a whole came in at 2.4% for the second-year running.

It was revealed earlier this week that the UK economy grew by 2.2% last year .

However, the US figure will be a concern for the Federal Reserve, which took the decision to raise interest rates from their financial crisis low back in December - arguing it was satisfied the domestic economy was strong enough to take it.

However, the move strengthened the dollar further and the GDP release could be seen as evidence that fear of a rate raise had an impact too.

Experts said the latest figures would weigh on expectations about the pace of more rate increases throughout this year.

Markit (NasdaqGS: MRKT - news) chief economist Chris Williamson said: "The slowdown adds more pressure to the Fed to reconsider the timing of future rate hikes, and suggests that policymakers may pare back their current expectations of a further four quarter-point hikes in 2016."

The slowdown was led by a fall in exports - made more expensive by the dollar's strength.

Business investment was also found to have plunged - particularly in the oil sector which is suffering the effects of a collapse in prices linked to economic weakness globally.

Consumer spending slowed slightly though house purchases remained strong.

US stock market futures pointed to a positive opening - with the GDP figure being interpreted as an excuse for the Fed slowing its expected path of interest rate rises.

Shares (Berlin: DI6.BE - news) were up in Europe and Asia earlier on the back of the surprise decision by Japan's central bank to ease monetary policy further.

The move highlights the extent to which economic fortunes are varying worldwide - with the plunge in commodity costs betraying true market fears for the world economy amid gloomier forecasts for 2016.

The US is expected to be more resilient than most as hiring has remained strong and consumer spending resilient though downside risks remain from export weakness and the shale oil sector's battle for market share with other major oil producers - especially the OPEC cartel.