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US economy grew 3.2pc in 4th Quarter

Thursday, January 30 14:53:55

Robust household spending and strong exports kept the U.S. economy on solid ground in the fourth quarter, but stagnant wages could chip away some of the momentum in early 2014.

Gross domestic product grew at a 3.2 percent annual rate, the Commerce Department said on Thursday, in line with economists' expectations.

While that was a slowdown from the third-quarter's brisk 4.1 percent pace, it was a far stronger performance than anticipated earlier in the quarter.

It also was welcome news in light of a 0.3 percentage point drag from October's partial government shutdown and a much smaller contribution to growth from a restocking by businesses.

Earlier in the quarter many economists were expecting a growth pace below 2 percent given that an inventory surge accounted for much of the increase in the July-September period.

Growth over the second half of the year come in at a 3.7 percent pace, up sharply from 1.8 percent in the first six months of the year. It was the biggest half-year increase since the second half of 2003.

"The clear message is that the economy entered into 2014 with a lot of momentum," said Carl Tannenbaum, chief economist at Northern Trust in Chicago.

U.S. stock index futures and the dollar held their gains after the data.

Consumer spending was the main driver of fourth-quarter growth, but there was also help from other segments of the economy such as trade and business investment.

The advance fourth-quarter GDP was released a day after the Federal Reserve said "growth in economic activity picked up in recent quarters."

The Fed on Wednesday announced another reduction to its monthly bond purchases and appeared to shrug off a surprise sharp slowdown in job growth in December.

Consumer spending rose at a 3.3 percent rate, the strongest since the fourth quarter of 2010. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, advanced at a 2 percent pace in the third quarter.

Businesses accumulated $127.2 billion worth of inventories, the most since the first quarter of 1998, adding 0.42 percentage point to GDP growth. Inventories had risen $115.7 billion in the third quarter, contributing 1.67 percentage points to output. (Reuters)