Economy grew at slower pace in the fourth quarter

The economy expanded at a slower pace than initially estimated during the final three months of last year. 

The Commerce Department reported on Friday that gross domestic product grew at an annual rate of 2.2 percent in the October-December quarter, a more sluggish pace than the 2.6 percent first estimated in January. 

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The third quarter posted much stronger 5 percent rate of growth, which was the best showing since 2003. 

Still, economists say the slow down is temporary and they are expecting the economy to pick up pace this year with growth forecast to eclipse 3 percent.

Jason FurmanJason FurmanTrillion-dollar deficits as far as the eye can see, and hardly a voice of caution to be heard Billionaires paid lower tax rate than working class for first time in US history: study Economy adds 130K jobs in August, falling below expectations MORE, chairman of the Council of Economic Advisers, said the latest figure reflects downward revisions to more volatile sectors.

"Overall, today’s report is consistent with a wide range of indicators showing further labor market strengthening, increasing domestic energy security, continued low health cost growth, and resiliency in the face of slower growth in the global economy," he said.

Overall, the economy expanded at a 2.4 percent rate in 2014, a slight improvement from the 2.2 percent the previous year.

Growth lost some momentum because businesses slowed their inventory stockpiling and the trade deficit expanded. 

But consumer spending, which accounts for about 70 percent of economic activity, was a bright sport in the report, growing at a 4.2 percent annual rate, the best showing in nine years, up from 3.2 percent in the third quarter. 

That latest figure is slightly lower than the first estimate of 4.3 percent growth.

Jobs growth and lower gas prices have put more money into consumers' pockets in recent months, helping to boost spending. 

The labor market added more than 3 million jobs last year and finished 2014 strong, adding more than 750,000 total jobs in November and December. 

In January, employers added 257,000 workers to their payrolls. The next report is due out in a week. 

The contribution of inventories was lowered to 0.1 percentage point from 0.8 in the fourth quarter. 

But that shift could help boost growth in the first half of 2015 because businesses will have to ramp up their supplies to meet growing consumer demand, according to PNC economists. 

They estimate that growth will clock in around 2.7 percent in the January-March quarter and will be held back slightly by severe winter weather.

The growth of imports also was greater than expected and trade subtracted 1.2 percentage points from growth. 

Updated at 11 a.m.