Overall U.S. economic activity eased back on the gas considerably in the final quarter of last year while it expanded in 2015 at the same pace as the year before.

The nation’s gross domestic product, which measures the total output of goods and services, increased at an annual rate of 0.7% in the October through December period, according to the first of three estimates from the U.S. Commerce Department. This is down from a 2% pace in the third quarter and 3.9% in the second quarter of 2015.

Consumer spending growth slowed to 2.2% in the fourth quarter from 3% in the third quarter, likely due to warmer than normal weather that reduced demand for winter apparel and utilities.

In contrast, residential investment, which includes homebuilding and sales, remained strong, increasing by 8.2% for a second consecutive quarter, but an offsetting contraction in non-residential investment left overall investment little changed.

For 2015, the GDP increased 2.4%, the same rate as in 2014. It primarily reflected positive contributions from personal consumption expenditures, nonresidential fixed investment, residential fixed investment, private inventory investment, state and local government spending, and exports, according to the department. Imports, which are a subtraction in the calculation of GDP, increased.

“A weaker-than-expected year-end growth report, undermining expectations of momentum driving the U.S. economy above and beyond the current range of circa 2% to 2.5% growth,” said Lindsey Piegza, chief economist at Stifel Fixed Income. “Consumers remain restrained amid longstanding modest growth in wages, and businesses, facing the perfect storm of a heightened inventory overhang, rising U.S. dollar, and tepid global demand, remain hesitant to invest, sitting on the sidelines.”

Going forward, she said, the Federal Reserve remains convinced that continued moderate growth will be sufficient to spark further gains in topline activity, employment and inflation but so far there has been only moderate growth.

“Without meaningful improvement in investment near-term, the U.S. economy will struggle to maintain the current trend pace, let alone gain momentum beyond 2% to 2.5%,” Piegza said.

But in contrast, there is reason to be optimistic about a rebound later this year, according to Josh Nye, economist at RBC Economics.

“The slowing in the fourth-quarter 2015 consumer spending growth followed a string of strong increases in recent quarters. Robust job gains alongside a further decline in energy prices should prompt a return to that solid trend in 2016,” he said. “The decline in business investment reflected both a retracement of strong equipment investment in the prior quarter and a further decline in non-residential structures. The latter is partially due to weaker energy sector investment, and while low oil prices will prompt further declines, the energy component’s shrinking share of investment points to less of a drag on overall spending going forward,”

RBC’s forecast assumes that stronger consumer spending, continued strength in residential investment, and a rebound in business investment will help domestic demand growth rebound to around 3% early this year.

“We expect the drag on growth from net trade to persist, however, given solid domestic spending, weak external growth, and further strengthening in the U.S. dollar. That should limit the rebound in GDP growth to 2.5% in the first quarter of 2016,” Nye said.

Consumers Still Upbeat Despite Shocks

In the meantime, the expectation of stronger consumer spending that Nye described may indeed be at least tough to knock down, according to a separate report showing consumer confidence is still strong with 2016 financial markets starting off on a rough note and an epic blizzard last weekend.

The University of Michigan Survey of Consumers shows its measure of consumer sentiment this month was just below last month’s level. Its gauge of expectations is unchanged and consumers’ assessment of current economic conditions fell slightly

“The small downward revisions were due to stock market declines that were reflected in the erosion of household wealth, as well as weakened prospects for the national economy,” said Surveys of Consumers chief economist, Richard Curtin. “The interviews conducted from last Friday until early this week provide no evidence that the East Coast blizzard influenced the data.”

He noted the overall level of confidence is below last January's peak, but so far, the decline amounts to just 6.2%, indicating slower growth, not a recession in 2016.