The economy grew at a 3.2 percent annual rate in the fourth quarter following a 4.1 percent rise in the third quarter. This is the best two quarter performance since the fourth quarter of 2011 and the first quarter of 2012 when the economy grew at 4.9 percent and 3.7 percent annual rates, respectively. Consumption grew at a 3.3 percent rate, accounting for 70.6 percent of the growth in the quarter. Investment continued the weakness it has shown over the last two years, growing at just a 3.8 percent annual rate. Somewhat surprisingly, housing fell at a 9.8 percent annual rate, its first decline since the third quarter of 2010.
Interestingly, the rate of inventory accumulation increased to $127.2 billion, one of the most rapid paces on record. This likely means slower growth in future quarters as slower accumulations will be a drag on growth. Imports were little changed in the quarter. As a result, trade added 1.33 percentage points to growth. Much of this was offset by a sharp drop in spending at the federal level which subtracted 0.98 percentage points from growth. This will not be repeated in future quarters.
One item of clearly positive news was the slow growth in health care costs. Spending on health care services rose at just a 3.6 percent annual rate in the quarter. This means that health care spending is continuing to fall as a share of GDP.

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