U.S. GDP Growth Revised Down to 2.5% Pace in Fourth Quarter

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WASHINGTON—U.S. economic growth was slightly weaker than initially thought during the fourth quarter, and is on track to slow in the beginning of 2018.

Gross domestic product, a broad measure of the goods and services produced across the U.S., rose at a 2.5% seasonally and inflation-adjusted annual rate in the fourth quarter, the Commerce Department said Wednesday.

The agency in January estimated last quarter’s growth rate at 2.6%. Economists surveyed by The Wall Street Journal had expected a revised reading of 2.5% growth.

The downward revision reflected a greater subtraction from private inventory investment.

Output grew 2.5% in the fourth quarter of 2017 compared with same period a year earlier. That was far higher than the 1.8% expansion in 2016.

The U.S. economy picked up steam in the second and third quarters of last year, posting above-3% growth rates, but some forecasters expect growth will moderate in the early months of 2018. Forecasting firm Macroeconomic Advisers on Tuesday projected a growth rate of 1.8% in the first quarter.

Cotopaxi, a Utah-based outdoor gear company, is building two brick-and-mortar stores in 2018 and expects revenue to grow faster than last year. Still, the business is remaining cautious about inventory purchases, said chief executive Davis Smith.

“So far we haven’t seen anything that’s indicating softness in the market, but we know how quickly that can turn,” Mr. Smith said. “We’re making decisions in changing the way we run our business based on the expectation that the economy will slow.”

Many forecasters continue to expect healthy U.S. growth this year, bolstered by tax cuts at home and stronger conditions overseas.

”The robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in U.S. exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment,” Federal Reserve Chairman Jerome Powell said Tuesday in testimony before Congress.

Wednesday’s report showed consumer spending, which accounts for more than two-thirds of U.S. economic output, grew 3.8% in the fourth quarter, matching the first estimate.

Same-store sales at Potbelly Corp. decreased 2.4% in the fourth quarter from the same period a year earlier. The company expects sales to be flat in 2018 as a whole, according to S&P Global Market Intelligence transcripts.

”The early [2018] trends are not as strong as fourth-quarter trends,” said Michael W. Coyne, Potbelly’s chief financial officer, in a call with analysts on Friday. “What wasn’t planned for was that we had substantially worse weather this year than last.”

Business investment was slightly weaker than initially reported, growing at a 6.6% rate last quarter versus an originally reported 6.8%. Investment is still much stronger than in 2015 and 2016, when tanking oil-and-gas prices weighed down capital spending. Business investment increased 6.3% in the fourth quarter compared with a year earlier, the strongest calendar-year growth since 2011.

Wednesday’s report also showed some upward revisions in the housing sector and for U.S. exports. Residential investment increased at a swift 13% annual rate, and exports expanded at a 7.1% rate in the fourth quarter.

Write to Sarah Chaney at sarah.chaney@wsj.com and Josh Mitchell at joshua.mitchell@wsj.com

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