WASHINGTON (Reuters) - U.S. fourth-quarter growth is likely to be revised higher after services industry data on Wednesday suggested a much stronger pace of consumer spending than the government had previously assumed, JPMorgan economist Daniel Silver said.
The government last month slashed its gross domestic product estimate for October-December quarter to a 2.4 percent annual pace from a previously reported 3.2 percent rate.
Silver, at JPMorgan in New York, said the quarterly services survey, from which government’s estimates for services consumption and intellectual property products are derived, showed a much more robust pace of consumer spending in the fourth quarter than the government’s estimated 2.6 percent rate.
“We now believe real consumption increased 3.4 percent and our estimate of growth in intellectual property products is unchanged at 8.0 percent with rounding,” said Silver in a research note. “We are raising our tracking estimate of fourth quarter real GDP growth to 3.0 percent.”
The economy grew at a 4.1 percent rate in the third quarter.
It is not unusual for the government to make big revisions to GDP numbers as it does not have complete data when it makes its first and second estimates. The quarterly services survey has caused revisions to GDP growth over the last several years.
Should the government raise fourth-quarter growth, that would suggest underlying strength in the economy at the end of 2013 and bolster the argument that a slowdown in growth at the start of this year was weather-driven and would be temporary.
The government will publish its third GDP growth estimate for the fourth quarter on March 27.
Reporting by Lucia Mutikani; Editing by Stephen Powell