The U.S. economy barely grew last quarter, finishing the year much as it had started and stoking concern about its momentum in 2016.
Overall, the economy expanded at an annual rate of just 0.7 percent in the fourth quarter of 2015, the Commerce Department said Friday.
Little more than a month ago, economists thought growth was running at more than twice that pace, but data showing tepid business activity, still-sizable inventories and slightly more cautious consumer spending during the holiday season indicated that the economy was likely in the midst of another anemic patch.
It could have been worse — a few economists on Wall Street had thought the economy might have actually contracted last quarter, while others predicted no growth.
As it turned out, the slowdown was brought on by slower sales of durable goods like cars and appliances, a weaker trade picture and falling inventories. Services held up a bit better, underscoring how domestically driven sectors are faring much better than industries that depend on overseas demand.
For all of 2015, the economy grew 2.4 percent, identical to the tempo recorded in 2014 but considerably better than the 1.5 percent gain for 2013.
Despite the lackluster numbers for gross domestic product, by other yardsticks the economy looks considerably healthier.
The unemployment rate now stands at 5 percent and most experts forecast that it will keep falling. Employers added an average of nearly 300,000 positions a month in October, November and December.
The real estate market, the principal investment asset for most U.S. families, has also held up well, despite the recent sell-off on Wall Street and turmoil in overseas markets.
And last month, the Federal Reserve raised short-term interest rates for the first time in nearly a decade, a sign that policy makers believe the economy is strong enough to withstand slightly tighter monetary policy over the long term.
On Wednesday, the Fed held off on another interest rate increase after a two-day meeting but in a statement, officials indicated they would weigh another increase when policy makers next meet, in March.
"There are definitely problem areas, but consumer spending, housing and the nonenergy parts of capital spending are still fairly solid," said Nariman Behravesh, chief economist at IHS, a research and consulting firm.
Friday's report is the first of three estimates the Commerce Department will make for growth in gross domestic product, and as more data comes in, the figure could be revised upward or downward. The next estimate will be released on Feb. 26.
One major headwind has been shrinking inventories, which reduced growth by nearly half a percentage point last quarter.
After big increases in goods at warehouses and on store shelves lifted growth in the middle of the year, "there was probably some payback in the fourth quarter," Behravesh said in an interview before the release of the data.
"That affects top-line growth but doesn't really say so much about the fundamentals of the U.S. economy," he added.
Looking ahead, Behravesh expects the economy to expand at a rate of about 2.5 percent in the first half of 2016, with the unemployment rate continuing to fall and salaries beginning to show signs of life after years of stagnation.
"I think it's entirely possible we could see unemployment fall to 4.5 percent by the end of the year," he said.
Still, expectations for the coming quarters have been drifting lower as weaker data for the fourth quarter of 2015 has accumulated in recent weeks.
Big business has been noticeably cautious to invest, despite healthy profits in many industries.
The strong dollar and weakness in Asia and Europe have hurt many manufacturers, commodity producers and other exporters, especially in the Midwest.
At the same time, the plunge in oil prices has prompted drastic cuts in spending on energy exploration and production, creating another negative for business.
Steel companies and other manufacturers that supply metal pipe and other equipment to drillers have also been feeling a sharp chill as oil prices dived below $30 a barrel earlier this month. Crude has rebounded slightly, and the U.S. benchmark now stands at about $33.50 a barrel.
One mystery for economists has been why lower oil prices haven't done more to stimulate growth, especially among consumers.
One explanation is that Americans are saving a substantial portion of the windfall at the gas pump or using it to pay down debt, which ultimately benefits the economy even if it represents a drag in the short term.
Another possibility is that consumers remain skeptical about how long gasoline prices will stay below $2 a gallon on average, the lowest they have been since the depths of the financial crisis in late 2008.