Caterpillar Inc, the world's largest maker of construction equipment, on Monday reported a sharp drop in quarterly profits, citing weak demand in China as one reason for the decline.
PLENTY OF POSITIVES
There were several bright spots in the GDP report. For one, household income after taxes and inflation increased at a strong 6.8 percent rate. That allowed households to step up their saving, and the saving rate rose by more than a percentage point. Consumers were also helped by slowing inflation. An inflation gauge in the report advanced at just a 1.2 percent pace, down from 1.6 percent in the third quarter. So-called core prices rose just 0.9 percent, the smallest gain in two years.
Consumer spending, which accounts for more than two-thirds of economic activity, rose at a 2.2 percent rate, accelerating from the prior quarter's 1.6 percent growth pace, while business investment rebounded after its first drop in 1-1/2 years.
The housing market was another positive.
Homebuilding grew at a 15.3 percent rate after notching a 13.5 percent growth pace in the third quarter. It added to growth last year for the first time since 2005.
"A turnaround in the housing market will be a key support to the economy this year, with homebuilding contributing to growth and higher home prices supporting consumer spending," said Stuart Hoffman, chief economist at PNC Financial in Pittsburgh.