Last Updated Feb 26, 2016 9:49 AM EST
The U.S. economy unexpectedly expanded at a more rapid clip than previously estimated in the final quarter of last year, with companies less zealous in their efforts at cutting back undesirable inventory, which may dent production in first quarter of 2016.
"The overall picture for 2016 remains the same. Growth will pick up somewhat in the first quarter, to around 2 percent at an annual rate, thanks to a gain in consumer spending, but inventories will be a drag on growth in the near term," noted Gus Faucher, deputy chief economist at PNC Financial Services Group.
Gross domestic product, the value of all goods and services produced, rose at a 1 percent annualized rate, versus an initial estimate of 0.7 percent, the Commerce Department reported on Friday.
"The two main factors in the lift was an unexpected rise in inventories versus the first print and a big revision down in imports," emailed Peter Boockvar, chief market analyst at the Lindsey Group. "Combined, both added an extra 5 tenths from the preliminary report and about account for the headline number vs the estimate."
Personal consumption climbed 2 percent.
Businesses stockpiled $81.7 billion worth of inventory instead of the $68.6 billion estimated in January, illustrating an upward revision to the inventory valuation adjustment.
The biggest factors to the upward revision to inventory investment were retail trade and mining, utilities and construction, with inventories deducting just 0.14 percentage point from GDP growth versus the previously reported 0.45 percentage point.
While the economy moderated in the fourth quarter after expanding 2 percent in the prior three-month period, some economists expect growth to pick up in the months ahead, bolstered by a healthier labor market. Lower gasoline prices are also expected to fuel consumer spending.
"While this revision is welcome, it does not help answer the key questions for growth this year, namely, when will oil sector (capital expenditures) stop falling, and will the personal saving rate mean-revert, boosting spending?" Ian Shepherdson, chief economist at Pantheon Macroeconomics asked in a research note.