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But it represents far slower growth than the economy's 2% expansion in the third quarter, and the news comes at a time when the Federal Reserve is looking to slowly raise interest rates, aiming to stave off possible problems down the road like inflation.
While the economy slowed down in fourth quarter, and businesses and investors are taking it on the chin, everyday Americans seem to be doing pretty well. Consumer spending, which accounts for two-thirds of all economic activity in the U.S., rose 2.2%. That amounted to a slowdown from the third quarter's 3%. At the same time, the full year pace of consumer spending for 2015 -- 3.1% -- was the fastest in a decade.
In contrast to consumers, the business sector of the economy struggled with headwinds like economic weakness in Europe and China and a strong dollar, both of which make it harder for U.S. companies to sell exports. At the same time falling oil prices led to a weakening in new investment by the oil and gas industry.
Weakness in China and the energy sector have already been registered by the stock market, down more than 5% since the start of 2016. The Federal Reserve, whose Open Markets Committee met earlier this week, said on Wednesday that it would pass for now on raising rates for the second time since the onset of the 2008 financial crisis. Friday's relatively weak economic data will make the Fed's decision more difficult when it meets again in March.