Economy barely expands in fourth quarter

Thu Feb 28, 2013 9:25am EST
 
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By Jason Lange

WASHINGTON (Reuters) - The U.S. economy barely grew in the fourth quarter although a slightly better performance in exports and fewer imports led the government to scratch an earlier estimate that showed an economic contraction.

Another report on Thursday showed a drop in new claims for unemployment benefits last week, adding to a string of data that suggests the economy improved early this year.

Gross domestic product expanded at a 0.1 percent annual rate, the Commerce Department said, missing the 0.5 percent gain forecast by analysts in a Reuters poll.

The growth rate was the slowest since the first quarter of 2011 and far from what is needed to fuel a faster drop in the unemployment rate.

Still, much of the weakness came from a slowdown in inventory accumulation and a sharp drop in military spending. These factors are expected to reverse in the first quarter.

"The breakdown remains consistent with more positive future growth," TD Securities said in a note to clients.

Consumer spending was more robust by comparison, although it only expanded at a 2.1 percent annual rate.

Because household spending powers about 70 percent of national output, this still-lackluster pace of growth suggests underlying momentum in the economy was quite modest as it entered the first quarter, when significant fiscal tightening began.   Continued...

 
A flag is seen outside the New York Stock Exchange in New York, January 4, 2013. REUTERS/Eric Thayer