Stronger-than-expected consumer spending on services is boosting estimates for U.S. economic growth in the final months of 2014.
Revenue at health-care and social-assistance companies climbed 4.2% in the fourth quarter from the prior three months, up sharply from the third quarter’s 0.3% growth, the Commerce Department said Wednesday in its Quarterly Services Survey. The data weren’t adjusted for seasonal variations or price changes.
From a year earlier, health-care revenues climbed 5.4% in the fourth quarter, accelerating from 4.8% annual growth in the third quarter.
Other service-providing sectors, however, saw more mixed growth in the final months of 2014. Finance and insurance firms saw revenue rise just 0.8% from the third quarter, down from 2.3%, and annual growth slowed to 5.2% in the fourth quarter from 8.2% in the third quarter. Annual revenue growth also decelerated slightly in the information sector and at professional, scientific and technical services firms.
The data will be incorporated into the Commerce Department’s next estimate for gross domestic product, the broadest measure of output across the U.S. economy. The agency’s last estimate pegged growth during the fourth quarter at a 2.2% seasonally adjusted annual rate. A new reading will be released March 27.
Private forecasters on Wednesday predicted an upward revision for consumer spending on services, offset somewhat by lower investment in software. J.P. Morgan Chase raised its projection for fourth-quarter GDP growth to 2.5% from 2.1%. Barclaysraised its GDP growth estimate to 2.3% from 2.1%. Macroeconomic Advisers raised its estimate to 2.4% from 2.3%.
Wednesday’s report, known as the QSS, doesn’t get much attention in the world of U.S. economic indicators. But it’s an important source of hard data on how much consumers are spending on services like haircuts, bookkeeping and appendectomies.
The QSS can lead to big revisions for service-spending data between the Commerce Department’s second and third quarterly estimates for GDP. In the first quarter of 2014, health-care spending was estimated to have contributed 1.01 percentage points to growth–until the QSS came out and it swung to a 0.16 percentage-point subtraction. In the second and third quarters, on the other hand, the QSS led to upgrades for health-care spending.
In its latest estimate for fourth-quarter GDP, the Commerce Department saw consumer spending on services contributing 1.82 percentage points to the 2.2% growth rate. Health-care services alone accounted for 0.53 percentage point of growth.
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