Economy in U.S. grew at revised 0.4% pace in fourth quarter

Business Spending

A bigger increase in the rate of business investment in structures and a smaller trade gap accounted for the upward revisions to fourth-quarter growth.

Corporate spending on buildings increased at a revised 16.7% annual rate in the fourth quarter, the most in more than a year, after a previously reported 5.8% pace.

A revision to the trade gap showed a smaller difference between exports and imports. The deficit shrank to $384.7 billion from $395.2 billion in the previous three months. The narrowing contributed 0.33 percentage point to growth, compared with a previous estimate of 0.24 point.

While the expansion slowed last quarter, Fed officials have said they see signs the economy is poised for a pickup in 2013. Data on the labor market, consumer spending and business investment suggest “a return to moderate economic growth following a pause late last year,” the Federal Open Market Committee said in a March 20 statement.

Federal Reserve

The central bank last week repeated that it would hold its benchmark interest rate near zero as long as joblessness stayed above 6.5% and the outlook for inflation was below 2.5%. It also said it would keep up its bond buying at a pace of $85 billion a month to bolster the expansion.

Consumer spending, about 70% of the economy, climbed at a 1.8% rate last quarter, revised from a previously estimated 2.1%, today’s figures showed.

Business spending on equipment and software climbed at a 11.8% pace after dropping at a 2.6% rate in the previous quarter. It added 0.82 percentage point to growth.

Residential investment, a bright spot for the U.S. expansion, rose at a revised 17.6% pace from October through December following a 13.5% rate in the third quarter.

Inventories subtracted 1.52 percentage points from fourth- quarter growth compared with a previously reported 1.55 percentage points. Stockpiles were rebuilt at a $13.3 billion annual pace after a $60.3 billion rate in the third quarter.

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