U.S. economy grows 2.6% in fourth quarter, GDP shows

The U.S. expanded at a 2.6% annual pace in fourth quarter, extending one of the best stretches of growth during the current eight-and-a-half-year-old upturn. GDP fell short of MarketWatch's 3% forecast, however, owing to lower inventory production and a bigger trade deficit. Consumer spending, the main engine of the economy, rose a strong 3.8%, the biggest increase in almost two years. Investment in new housing increased 11.6%, business spending on equipment surged 11.4% and outlays on structures edged up 1.4%, according to Commerce Department data. Yet the value of inventories declined by $29.3 billion. Trade was an even bigger drag on GDP. Imports jumped 13.9%, doubling the 6.9% rise in exports. Inflation as measured by the PCE price index increased at a 2.8% annual rate, the highest pace since 2011. Core PCE rose at a slower 1.9% clip, however.