Economic growth slowed at the end of 2014, but robust consumer spending during the final quarter of the year, which is expected to continue as Americans enjoy the benefits of lower energy prices, suggested that the economy was likely to pick up speed again in 2015.
At 2.6 percent, the rate of growth in the final three months of the year was a significant downshift from the blistering 5 percent pace recorded in the third quarter, but is still considered relatively healthy.
For all of 2014, the economy grew at a rate of 2.4 percent, the Commerce Department reported Friday morning, roughly in line with the underlying trend of the last five years.
Business investment slowed in late 2014, reversing strong gains in the previous two quarters. Many economists expect business spending to be lackluster in the coming months, hurt by deep cuts among drillers and other energy companies amid plunging oil prices.
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This week, the Fed signaled it would not raise short-term interest rates before June, at the earliest. Although Fed policy makers have been encouraged by stronger hiring, they remain concerned about very weak inflation along with paltry wage gains.
The 0.6 percent rise in compensation costs was healthy, Mr. Berger said, but not big enough to persuade Fed policy makers to move up their expected rate increase. Mr. Berger and the team at RBS recently pushed back their prediction of Fed action to September 2015 from June, on the belief the Fed will need to see a bit more evidence of better trends before pulling the trigger.
“The window for data is closing in terms of June, which is why we pushed it back to September,” Mr. Berger said. “You will need to see these trends continue for a bit more before the Fed is convinced that the labor market is running out of slack.”
