The U.S. economy grew at a faster pace than previously estimated in the fourth quarter, reflecting a bigger gain in business spending and a smaller trade gap.
Gross domestic product rose at a 0.4% annual rate, up from a 0.1% prior estimate and following a 3.1% pace in the third quarter, revised Commerce Department figures showed today in Washington. The fourth-quarter slowdown was due to the biggest slump in military spending since 1972 and a reduction in the rate of inventory building.
The world’s largest economy is projected to accelerate in the first quarter as companies invest in new equipment and rebuild depleted stockpiles, while consumers keep spending in the face of higher taxes. The pace of growth and efforts to drive down joblessness help explain why Federal Reserve policy makers are sticking to asset-purchase plans.
“Certainly we would like to see stronger growth, but we did have some one-time drags at the end of 2012,” said Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, who correctly projected the GDP revision. “I would expect growth to pick up through 2013. Consumers spending looks like it’s holding up pretty well despite the increase in taxes. The housing market is certainly a big plus. Then business investment growth is pretty good. Profits are good.”
The median projection in a Bloomberg survey for the Commerce Department’s third estimate of fourth-quarter GDP called for a 0.5% increase. Forecasts from the 79 economists surveyed ranged from 0.1% to 0.8%.
Another report showed more Americans than forecast filed applications for unemployment benefits last week, bringing a halt to the recent progress in the labor market. First-time jobless claims rose by 16,000 to 357,000 in the week ended March 23, the highest level in more than a month, the Labor Department said today in Washington. Economists surveyed by Bloomberg projected 340,000 claims.
Stock-index futures held gains after the figures. The contract on the Standard & Poor’s 500 Index expiring in June rose 0.1% to 1,557.9 at 8:35 a.m. in New York.
For all of 2012, the world’s largest economy expanded 2.2% after a 1.8% gain in the prior year.
Today’s report offered a first look at corporate profits. Earnings increased 2.3% in the fourth quarter after rising 2.4% in the prior period. They climbed 3.1% from the same time in 2011.