US growth cooled in the fourth quarter

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US economic growth cooled in the fourth quarter and after-tax corporate profits recorded their biggest drop since early 2011, as a strong dollar dented the earnings of multi-national corporations.

Gross domestic product expanded at a 2.2 per cent annual rate last quarter, the Commerce Department said yesterday in its third estimate of GDP. That was unrevised from forecast last month.

Businesses throttled back on inventory and equipment investment, but robust consumer spending limited the slowdown in the pace of activity in the fourth quarter. The economy grew at a 5 per cent rate in the third quarter.

After-tax corporate profits declined $57.1bn, the biggest fall since the first quarter 2011, after rising $52.4bn in the third quarter. Corporate profits from outside the United States decreased $36.1bn after increasing $16.5bn in the previous quarter.

Multinationals such as technology giant IBM, semiconductor maker Intel Corp, industrial conglomerate Honeywell and Procter & Gamble, the world’s largest household products maker, have warned that the dollar will hurt profits this year.

The dollar gained 7.8 per cent against the currencies of the main US trading partners between June and December.

Weak profits could undermine business spending on equipment and hiring. For all of 2014, profits fell 8.3 per cent, the largest annual drop since 2008.