US Q4 GDP beats forecasts despite downward revisions to investment

America's economy grew at a slightly faster pace than had been thought at the end of 2016, as estimates of household spending were revised higher but were offset by a much slower pace of business investment.

Gross domestic product expanded at an annualised pace of 2.1% year-on-year during the final quarter of 2016, according to a second set of revisions from the Department of Commerce, versus a previously estimated rate of growth of 1.9%.

Markets had anticipated a reading of 2.0%.

In the third quarter of 2016 GDP expanded at a 3.5% clip.

Corporate after tax profits - the key bit of new data contained in Thursday's report - advanced at an annual rate of 2.3% in the fourth quarter, down from 6.7% over the prior three months.

The rate of growth in household consumption was revised higher to show an annualised pace of growth of 3.5%, up from the 3.0% previously calculated.

A faster pace of inventory accumulation also contributed to growth, with Commerce now estimating that it added 1.04 percentage points to the quarterly annualised rate of GDP growth, up from 0.94 points previously.

However, the pace of business fixed investment - perhaps the most important component of GDP - was revised down to show a rise of 2.9%, which was lower than the prior estimate of 3.2%.

The PCE price index rose by 1.3%, compared with an increase of 1.7% for the previous three months.

"Altogether, the third estimate of Q4 GDP paints a picture of a healthy consumer, likely fueled by ongoing gains in employment, modest increases in wages, and solid balance sheets. However, fixed investment remains soft. We expect the economy to grow at a broadly similar pace in Q1, although we expect the composition to change toward a slower rate of increase in consumer spending and less of a drag from net trade," said Blerina Uruci at Barclays Research.