U.S. economy grew at 0.1 percent rate in 4th quarter
WASHINGTON (AP) - The U.S. economy grew at a 0.1 percent annual rate from October through December, the weakest performance in nearly two years. But economists believe a steady housing rebound, stronger hiring and solid spending by consumers and businesses are pushing economic growth higher in the current quarter.
The Commerce Department's second estimate of fourth-quarter growth was only slightly better than its initial estimate that the economy shrank at a rate of 0.1 percent. And it was well below the 3.1 percent growth rate reported for the July-September quarter.
The revision to the gross domestic product was due to higher exports and more business investment. GDP is the broadest measure of the economy's output.
Many economists say temporary factors that held back growth in the fourth quarter are probably fading and growth is likely picking up in the January-March quarter.
Paul Ashworth, chief U.S. economist at Capital Economics, predicts growth could be as high as 2 percent in the current quarter despite higher Social Security taxes, which have reduced take-home pay for most Americans. Alan Levenson, chief economist for T. Rowe Price, said growth could be as high as 2.5 percent.
Ashworth noted that a sharp decline in defense spending and slower business restocking subtracted 2.9 percentage points from growth in the fourth quarter. At the same time, consumer spending and business investment - two key drivers of growth - accelerated at the end of last year.
"We still believe that the fourth-quarter GDP figures were a lot better than the headline stagnation suggests," said Ashworth.
The economy could continue to struggle if policymakers in Washington cannot reach agreements over the budget his month, including billions of dollars in spending cuts that are set to begin on Friday. And a spike in gas prices and higher taxes could hold back consumer spending.
Still, a raft of recent reports suggests that many aspects of the economy are improving.
The Labor Department said that the number of Americans seeking unemployment benefits fell 22,000 last week to a seasonally adjusted 344,000. The steep decline comes as hiring has strengthened, providing more income to consumers.
Employers have added an average of 200,000 jobs per month in the past three months. That's up from an average of 150,000 in the previous three months.
More jobs and ultra-low mortgage rates are helping the once-battered housing market recover. New-home sales jumped 16 percent to their highest level in 4 ½ in January.
At the same time, the number of new homes available for sale remains near record lows. That means builders will likely have to start construction on more homes and apartments to keep up with demand. That should create more construction jobs.
Home prices also rose in December compared with the same month a year ago by the most in more than six years. Rising home values also contribute to the housing recovery and the broader economy. They encourage more people to buy before prices rise further. Higher prices also build homeowners' wealth, which can spur more spending and economic growth.
Businesses and consumers are also showing greater confidence despite automatic spending cuts scheduled to take effect on Friday. A measure of consumer confidence rebounded in February after a sharp fall the previous month that likely was a result of the tax increase.
Companies, meanwhile, sharply increased orders in January for a category of long-lasting manufactured goods that reflect their investment plans. That suggests they are confident about their business prospects.
The Commerce Department's second estimate of fourth-quarter growth was only slightly better than its initial estimate that the economy shrank at a rate of 0.1 percent. And it was well below the 3.1 percent growth rate reported for the July-September quarter.
The revision to the gross domestic product was due to higher exports and more business investment. GDP is the broadest measure of the economy's output.
Many economists say temporary factors that held back growth in the fourth quarter are probably fading and growth is likely picking up in the January-March quarter.
Paul Ashworth, chief U.S. economist at Capital Economics, predicts growth could be as high as 2 percent in the current quarter despite higher Social Security taxes, which have reduced take-home pay for most Americans. Alan Levenson, chief economist for T. Rowe Price, said growth could be as high as 2.5 percent.
Ashworth noted that a sharp decline in defense spending and slower business restocking subtracted 2.9 percentage points from growth in the fourth quarter. At the same time, consumer spending and business investment - two key drivers of growth - accelerated at the end of last year.
"We still believe that the fourth-quarter GDP figures were a lot better than the headline stagnation suggests," said Ashworth.
The economy could continue to struggle if policymakers in Washington cannot reach agreements over the budget his month, including billions of dollars in spending cuts that are set to begin on Friday. And a spike in gas prices and higher taxes could hold back consumer spending.
Still, a raft of recent reports suggests that many aspects of the economy are improving.
The Labor Department said that the number of Americans seeking unemployment benefits fell 22,000 last week to a seasonally adjusted 344,000. The steep decline comes as hiring has strengthened, providing more income to consumers.
Employers have added an average of 200,000 jobs per month in the past three months. That's up from an average of 150,000 in the previous three months.
More jobs and ultra-low mortgage rates are helping the once-battered housing market recover. New-home sales jumped 16 percent to their highest level in 4 ½ in January.
At the same time, the number of new homes available for sale remains near record lows. That means builders will likely have to start construction on more homes and apartments to keep up with demand. That should create more construction jobs.
Home prices also rose in December compared with the same month a year ago by the most in more than six years. Rising home values also contribute to the housing recovery and the broader economy. They encourage more people to buy before prices rise further. Higher prices also build homeowners' wealth, which can spur more spending and economic growth.
Businesses and consumers are also showing greater confidence despite automatic spending cuts scheduled to take effect on Friday. A measure of consumer confidence rebounded in February after a sharp fall the previous month that likely was a result of the tax increase.
Companies, meanwhile, sharply increased orders in January for a category of long-lasting manufactured goods that reflect their investment plans. That suggests they are confident about their business prospects.
And they cannot expect to get enough profits and  tax revenue from minimum wage to run the state infrastructure for the Corporation?
  Happy days are here again??? They are going to have more labor camps with the company stores, more food banks to subsidize pay checks???
They have forgot there are three types of consumers that continue the economy, through Economic *system, the profit and loss sheets, *(SYSTEM, the most Quantitative and Qualitative, important word in Economics).
 a) system hasstructure, it contains parts (or components) that are directly or indirectly related to each other;
b) Â system hasbehavior, it contains processes that transform inputs into outputs (material, energy or data);
c) Â system hasinterconnectivity: the parts and processes are connected by structural and/or behavioral relationships.
The  system's structure and behavior is composed via subsystems and sub-processes to elementary parts and process steps,  through the GDP,  they are 1) supply, production, manufacturing, 2) Service types, real estates, sales outlets, Banks, bookstores, accounting, education, etc. and 3) the ultimate consumer, (people, aka labor and not cheap minimum labo as it is not going to supply profits and tax revenue.  Â
For some reason those advising have the heads buried, or with wall street, Â thinking gambling can run a nation by not going through the P&L sheets???