WASHINGTON – The U.S. economy expanded at a 3.2 percent pace in the fourth quarter as Americans’ spending climbed the most in three years, laying the ground for further improvement in 2014.
The annualized gain in gross domestic product matched the median forecast in a Bloomberg survey and followed a 4.1 percent advance in the prior three months, Commerce Department figures showed Thursday in Washington. Growth in the second half of the year was the strongest since the six months ended in March 2012. Consumer spending, which accounts for almost 70 percent of the economy, rose 3.3 percent, less than estimated.
The pickup in demand allowed the economy to overcome cutbacks in government outlays caused by the partial federal shutdown in October. Diminishing fiscal challenges and progress in the labor market will probably sustain consumer and corporate demand in 2014, helping explain why the Federal Reserve decided on Wednesday to keep paring stimulus.
“There is a fair amount of strength in the economy,” said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Mass., who was the second-best U.S. forecaster of the economy the past two years, according to data compiled by Bloomberg. “Consumer spending is on solid ground. We’re seeing other engines of growth picking up - capital spending is rebounding, exports are up.”
Contracts to purchase existing homes fell more than forecast in December as higher borrowing costs and bad weather held back sales, another report on Thursday showed. A gauge of pending home sales slumped 8.7 percent, the biggest decline since May 2010, after a 0.3 percent drop in November, according to figures from the National Association of Realtors.
Also on Thursday, a report from the Labor Department showed applications for unemployment benefits rose more than forecast last week to the highest level in more than a month, partly reversing a post-holiday slump.