Growth in the overall American economy in the final quarter of last year improved by double the government's initial estimate, according to a U.S. Commerce Department report released Friday. A separate reports shows the country’s manufacturing sector is still sluggish but housing continues to do well.

The gross domestic product increased at an annual rate of 1.4% in this third estimate, rather than the 1% pace reported a month ago and well ahead of the anemic 0.7% rate of the original estimate released in January.

This compares to a 2% rate of increase in the third quarter of 2015, 3.9% in the second quarter and just 0.6% in the first quarter of last year. The average pace in the first three quarters of last year was 2.2%, stronger than the fourth quarter rate.

Why the revision? “The general picture of economic growth remains largely the same," the report explained, but "personal consumption expenditures increased more than previously estimated.”

The GDP increased at a annual rate of 2.4% for all of 2015, the same as it was in last month’s estimate.

Before the latest numbers were released, RBC Economic said, “We continue to expect that stronger domestic household spending growth will result in a pickup in gross domestic product growth in the first quarter of 2016 from the 1.0% gain posted in the fourth quarter of 2015, although a continued drag from net trade and indications of weaker than expected business investment spending leave the monthly data pointing to a slightly smaller 1.9% gain in the quarter than the 2.2% increase that we had previously expected.”

Durables Still Part of Weak Manufacturing Picture

Meantime, a separate report released Thursday by the department shows continuing lower new orders and shipments for manufactured goods designed to last at least three years, known as durable goods.

The 2.8% drop in durable goods orders in February from the month before follows a downwardly revised 4.8% improvement in January, which was the first hike out of the last four months. Year-over-year, orders remains positive, up 1.8%.

Last month’s decline was driven by a 6.2% drop in new transportation orders. An indicator of future business investment, new orders minus those for defense and aircraft, fell 1.8% in February after advancing a downwardly revised 3.1% in January and falling 3.5% in December 2015.

The corresponding shipments measure declined by 1.1% in February. That follows January's downwardly revised 1.3% drop, first reported as a 0.4% decline, leaving the average measure for the two months at an annual rate that’s 7.2% below its fourth-quarter 2015 average, according to RBC Economics.

Overall shipments of durable goods fell 0.9% in February. That number is down two out of the past thee months. It was led by the transportation sector, which saw shipments fall 0.6%.

Durable goods orders remain under pressure, with three of the past four months posting negative growth, reinforcing an ongoing trend of weak capital investment, according to Lindsey Piegza, chief economist for Stifel Fixed Income.

“Businesses remain hesitant to invest in equipment and structures, as well as high-wage, full-time employees during a still-fragile recovery,” she said. “Amid tepid domestic and international demand, a strong U.S. dollar, and lingering uncertainty exacerbated by the upcoming Presidential election, not to mention ample regulation hanging overhead, many businesses remain on the sideline. Of course without business investment and expansion, there is little expectation for additional job creation and wage growth, which continues to keep the U.S. consumer restrained.”

This report follows one on the nation’s wider manufacturing sector for this month showing a slight uptick in activity, but growth remains weak as it has since the start of the year.

New Home Sales Bounce Back A Little

One area of the economy that continues to perform well is the homebuilding and sales sector.

Sales of newly built, single-family homes rose 2% in February from an upwardly revised January reading to a seasonally adjusted annual rate of 512,000 units, according to the Commerce Department.

“The February bounce back in sales is in line with our builders’ reports that the housing market continues to recover at a slow but steady pace,” said Ed Brady, chairman of the National Association of Home Builders.

January’s level was also revised upward to 502,000 units from the previously reported 494,000 units.

The February increase was driven entirely by new home sales rising 38.5% in the West. Sales dropped 4.1% in the South, 17.9% in the Midwest and 24.2% in the Northeast.

“While builders contend with industry headwinds such as labor shortages, relatively low mortgage interest rates and solid job growth should keep the housing market moving ahead as we enter the spring buying season,” said NAHB Chief Economist Robert Dietz.

New homes sales account for about one-tenth of the U.S. housing market.

The report follows the earlier reported disappointing performance of existing home sales in Februar,y where activity fell sharply, with weakness concentrated in the Northeast and Midwest.

“With today’s report showing similar weakness in these regions, it is likely that the late-January winter storm may have hampered homebuyer activity over the first two months of the year,” said Laura Cooper, economist at RBC Economic. “A return to seasonable weather conditions along with still-supportive borrowing conditions and ongoing hiring gains should see some of the weakness in overall sales activity reverse as the spring housing market kicks off.”

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Evan Lockridge

Evan Lockridge

Former Business Contributing Editor

Trucking journalist since 1990, in the news business since early ‘80s.

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