Quantcast
Get breaking news alerts via email

Click here to manage your alerts
FILE - In this Thursday, Oct. 10, 2013, file photo, employees at Sheffield Platers Inc. work on the factory floor in San Diego. The Commerce Department releases fourth-quarter gross domestic product on Thursday, Jan. 30, 2014 (AP Photo/Lenny Ignelzi, File)
U.S. economy grew at 3.2 percent rate in Q4
First Published Jan 30 2014 03:59 pm • Last Updated Jan 30 2014 03:59 pm

Washington » The U.S. economy grew at a 3.2 percent annual rate in the October-December quarter on the strength of the strongest consumer spending in three years, an encouraging sign for 2014.

The fourth-quarter increase followed a 4.1 percent growth rate in the July-September quarter, when the economy benefited from a buildup in business stockpiles.

Join the Discussion
Post a Comment

For 2013 as a whole, the economy grew a tepid 1.9 percent, weaker than the 2.8 percent increase in 2012, the Commerce Department said Thursday. Growth was held back last year by higher taxes and federal spending cuts.

With that drag diminished, many economists think growth could top 3 percent in 2014. That would be the best performance since the recession ended in mid-2009.

The expansion in the final three months of 2013 was fueled by a 3.3 percent growth rate in consumer spending, a significant acceleration from 2 percent spending growth in the third quarter. It was the best spending pace since the fourth quarter of 2010. Consumer spending is particularly important because it accounts for about 70 percent of the economy.

Government spending fell at a 4.9 percent rate last quarter. State and local government activity rose at a scant 0.5 percent rate, but federal government spending tumbled at a 12.6 percent rate. The 16-day partial government shutdown in October cut fourth-quarter growth by about 0.3 percentage point, the government said.

The strength in consumer spending reflected gains in purchases of durable goods such as autos and nondurable goods such as clothing. Spending on services also rose strongly.

Businesses invested in more equipment last quarter. There was also strength from a shrinking trade deficit. But housing construction declined.

Paul Ashworth, chief U.S. economist at Capital Economics, said he thinks growth will slow to an annual rate of around 2.5 percent in the first half of this year, in part because businesses will slow their stockpiling. But Ashworth said even this reduced growth rate should help further lower the unemployment rate and ensure that the Federal Reserve will keep reducing its stimulus this year. The unemployment rate is now 6.7 percent.

On Wednesday, the Fed said it will push ahead with a plan to shrink its bond-buying program because of the strengthening U.S. economy. It’s doing so even though the prospect of reduced Fed stimulus and higher U.S. interest rates has rattled global markets.


story continues below
story continues below

Jennifer Lee, senior economist at BMO Capital Markets, said the strength in the October-December quarter supported her view that the economy would grow at an annual rate of 2.9 percent this year.

The 3.2 percent estimated growth rate for the economy last quarter was the government’s first of three projections of gross domestic product for the October-December quarter. The GDP measures the economy’s total output of goods and services.

This year, economists think the economy will get a lift from continued gains in hiring. Further steady job growth would give more households money to spend and help lift consumer spending, which accounts for about 70 percent of economic activity.

In addition, U.S. manufacturers are expected to get a lift from rising global demand. And at home, housing construction and auto sales, which showed strength last year, are expected to register further gains in 2014.

Because of the stronger growth prospects, the Federal Reserve said Wednesday that it would continue to reduce the monthly bond purchases it’s been making to try to boost the economy.

The Fed bought $85 billion a month in bonds last year to try to keep long-term interest rates low. It announced an initial $10 billion reduction in December. And after its meeting Wednesday, it announced another $10 billion cut. That will put its monthly purchases at $65 billion.

Many analysts think the Fed will keep paring its support at each of its meetings this year until it eliminates new bond purchases entirely in December.

In making the announcement, the Fed cited an improving economy, including more strength in consumer and business spending.



Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment


About Reader Comments


Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Videos
Jobs
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Login to the Electronic Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.