Factory, income data support growth outlook

Wed Feb 29, 2012 6:09pm EST
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By Lucia Mutikani

WASHINGTON (Reuters) - The economy grew slightly faster than initially thought in the fourth quarter and a gauge of factory activity in the Midwest hit a 10 month-high in February, pointing to underlying strength in the economy.

Gross domestic product expanded at a 3 percent annual rate, the quickest pace since the second quarter of 2010, the Commerce Department said on Wednesday in its second estimate.

The reading, which was up from the 2.8 percent pace the government reported last month and reflected modest upward revisions to almost all components of GDP, added to the recent run of fairly upbeat economic reports.

The tone of the GDP report was further bolstered by upward revisions to income and savings data, which should help support consumer spending in the face of rising gasoline prices.

"Growth is still on the right path, but we are not going to see any acceleration. Income was revised up so it removed one of the headwinds to growth in the beginning of the year," said Yelena Shulyatyeva, an economist at BNP Paribas in New York.

A steady stream of fairly upbeat data ranging from employment to manufacturing has caused analysts to temper expectations of a sharp pullback in growth this quarter. First-quarter GDP growth is seen between 2 and 2.5 percent.

In another report, the Institute for Supply Management-Chicago said its measure of manufacturing in the Midwest region rose to a 10-month high of 64 in February from 60.2 in January.

A reading above 50 indicates expansion in the regional economy. Activity was boosted by a jump in new orders to a near one-year high and a backlog build-up.   Continued...

A Ford Motor assembly worker works on the under body of the Ford Focus vehicles for 2012 at the Michigan Assembly Plant in Wayne, Michigan December 14, 2011.   REUTERS/Rebecca Cook