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NEW YORK, Feb 14 (Reuters) – A forecast model by the Atlanta Federal Reserve on Thursday revised downward the U.S. economy’s expected fourth-quarter growth rate to under 2 percent following a plunge in retail sales in December.

Gross domestic product likely expanded at a 1.5 percent annualized rate in final three months of 2018 based on a 1.2 percent decline in retail sales in December, which was the steepest monthly drop in nine years, the Atlanta Fed’s GDPNow forecast model showed on Thursday.

This was much slower than the 2.7 percent pace the regional Fed’s GDP program calculated on Feb. 6.

The latest estimate was the weakest since the model began tracking fourth-quarter GDP growth in late October. It peaked at 3.0 percent before retreating on a series of disappointing data on business and housing activity.

The Commerce Department earlier on Thursday said domestic retail sales dropped 1.2 percent in December, the steepest fall since September 2009.

In response, the Atlanta Fed model revised its estimate on personal consumption growth in the fourth quarter to 2.6 percent from 3.7 percent. It also doubled the likely drag on GDP from reduced inventory investment to 0.56 percentage point from 0.27 percentage point. (Reporting by Richard Leong, editing by G Crosse)


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