Dados EUa (13:30): GDP growth revised up, as expected

[notiCIas]

GDP growth revised up, as expected

The economy grew faster in the fourth quarter than originally thought, despite weaker consumer spending.

February 28, 2006: 9:21 AM EST


WASHINGTON (Reuters) - The economy grew at a 1.6 percent annual rate in the fourth quarter, the weakest pace in three years but a bit swifter than originally thought, the government said Tuesday.

While the upward revision from the originally reported 1.1 percent rate matched Wall Street estimates, it showed the economy well off its third-quarter pace of 4.1 percent.

 

Forecasters, however, expect the economy to bounce back in the first quarter with a growth rate north of 4 percent, helped by warmer-than-usual weather at the start of the year, and financial markets largely ignored the data.

"We did have a stumble. It was related a lot to the hurricanes, and it's very clear that the economy is bouncing back nicely in the first quarter," said Dana Johnson, chief economist at Comerica Bank in Detroit.

The report suggested businesses were caught flat-footed by the hurricane-induced slowdown in economic activity at the end of 2005, as a rise in business inventories gave a boost to growth.

After whittling down stocks in the third quarter, business inventories rose by an upwardly revised $30.4 billion dollars in the final three months of the year.

Businesses also spent more on structures and equipment than first thought. Business investment spending rose at a 5.4 percent rate, compared with an originally reported 2.8 percent advance.

Government spending was also a touch stronger than first estimated, as were export sales. However, the upward revision to exports was more than offset by higher imports and the U.S. trade gap sliced nearly 1.5 percentage points off growth.

The economy's sluggish fourth-quarter pace reflected the weakest increase in consumer spending in 4-1/2 years, as well as a slackening in homebuilding activity and a somewhat slower business investment pace.

Inflation in the fourth quarter was a touch higher than first reported. The department said its price index for consumer spending rose at a 2.7 percent annual rate, compared to an originally reported 2.6 percent gain.

However, a core price measure that strips out food and energy costs increased at a 2.1 percent rate, not the 2.2 percent pace reported a month ago.

The Federal Reserve has raised its key overnight interest rate 14 straight times since June 2004, taking it from a basement-level 1 percent to a more-normal 4.5 percent and officials have said further hikes may be needed to ensure inflation does not gain a foothold.

"The most recent evidence ... suggests that the economic expansion remains on track," Fed Chairman Ben Bernanke told Congress in his debut appearance on Feb. 15, as he downplayed the slack fourth quarter. Fed officials expect growth this year to clock in close to the 3.5 percent logged in 2005.

Financial markets widely expect the central bank to bump up borrowing costs by another quarter-percentage point at the first policy session Bernanke will lead on March 27-28 and then one final time after that before calling it quits.

A separate report showed U.S. chain store sales rose last week as warm weather gave retailers a lift. The International Council of Shopping Centers and UBS Securities LLC said sales increased 1.5 percent from the previous week and were up 3.6 percent from a year ago.