WASHINGTON – The U.S. economy slowed less than previously estimated in the fourth quarter, reflecting a bigger gain in business spending and a smaller trade gap. Home construction Government spending subtracted 1.4 percentage points from growth in the fourth quarter. Military outlays declined at 22.1 percent annual pace, the biggest decrease since the third quarter 1972. For Rhode Island manufacturers, ISO 9001 has been much more than a certificate on the…
Gross domestic product rose at a 0.4 percent annual rate, up from a 0.1 percent prior estimate and following a 3.1 percent 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.
“This is not particularly strong growth compared to what we want to be seeing, especially to bring the unemployment rate lower, but looking at the details of the report, like business investment and inventories, the elements for growth to pick up are really there,” Robert Rosener, an economist at Credit Agricole CIB in New York, said before the report. Rosener was the second-best GDP forecaster in the past two years, according to data compiled by Bloomberg,
The median projection in a Bloomberg survey for the Commerce Department’s third estimate of fourth-quarter GDP called for a 0.5 percent increase. Forecasts from the 79 economists surveyed ranged from 0.1 percent to 0.8 percent.
For all of 2012, the world’s largest economy expanded 2.2 percent after a 1.8 percent gain in the prior year.
Corporate profits
Today’s report offered a first look at corporate profits. Earnings increased 2.3 percent in the fourth quarter after rising 2.4 percent in the prior period. They climbed 3.1 percent from the same time in 2011.
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 percent annual rate in the fourth quarter, the most in more than a year, after a previously reported 5.8 percent 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.
Federal Reserve
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.
The central bank last week repeated that it would hold its benchmark interest rate near zero as long as joblessness stayed above 6.5 percent and the outlook for inflation was below 2.5 percent. 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 percent of the economy, climbed at a 1.8 percent rate last quarter, revised from a previously estimated 2.1 percent, today’s figures showed.
Business spending on equipment and software climbed at a 11.8 percent pace after dropping at a 2.6 percent 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 percent pace from October through December following a 13.5 percent 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.
Leaner inventories may make way for a first-quarter pickup in production as consumer spending holds up amid higher payroll taxes. Congress allowed the payroll tax to return to its 2010 level of 6.2 percent from 4.2 percent at the start of the year, which means an American who earns $50,000 is taking home about $83 less a month.
Lawmakers also didn’t work out a plan to reduce the federal budget deficit, which means automatic across-the-board spending cuts, known as sequestration, began taking place on March 1, weighing on the economy at a time when government outlays were already a drag.
Military outlays
“As we entered 2013, we were cautiously optimistic in light of the economic uncertainty in many of our markets,” Chris Conway, chief executive officer of Clarcor Inc., said during a March 21 earnings call. “We expect economic activity in many of our markets to accelerate, but we remain cautious as current indicators point to uncertainty still. Europe continues to struggle, China growth is moderating and the U.S. continues to deal with political stalemate.”
Clarcor, based in Franklin, Tennessee, makes industrial products like Baldwin air filters.
The economy will expand at a 2 percent rate in the first quarter, according to the median estimate of 73 economists surveyed by Bloomberg from March 8 to March 13.
Gross income
Real gross domestic income for the fourth quarter was also released today for the first time. The measure, which shows the money earned by the people, businesses and government agencies whose purchases go into calculating growth, rose at a 2.6 percent annual rate from October through December after a 1.6 percent increase in the third quarter.
Over the last four quarters, real GDP rose 1.7 percent compared with a 1.8 percent gain in gross domestic income, the Commerce Department said.ISO 9001:2026: A Practical Opportunity to Build for What’s Next
