The fourth-quarter rise in the value of goods and services is expected to continue through the next two quarters.
By Associated Press
Published February 28, 2004
WASHINGTON - Brisk business spending helped the economy expand at a healthy 4.1 percent pace at the end of 2003, raising hopes that the recovery will be durable and spur more meaningful job growth in the coming months.
The Commerce Department's latest reading on gross domestic product, released Friday, showed the economy grew slightly faster in the October-to-December quarter than the 4 percent annual rate estimated a month ago.
GDP measures the value of all goods and services produced within the United States and is an important gauge of the economy's fitness.
Although the fourth-quarter pace was slower than the breakneck 8.2 percent growth rate registered in the third quarter, the economy's performance in the second half of last year represented the fastest back-to-back quarterly increases since the first two quarters of 1984.
"The economy is on track to having a good year," said Mark Zandi, chief economist at Economy.com. Looking ahead, economic growth in the current January-to-March quarter is expected to clock in at a rate of 4.5 percent or higher, according to some analysts. Growth in the April-to-June quarter also should be in that range, some economists say.
Even though the economy is in recovery, job growth has been painfully slow.
The economy has lost 2.2-million jobs since President Bush took office in January 2001, a sore spot as he seeks re-election. Democratic presidential contenders have seized on this to make the argument that his economic policies are not working.
Federal Reserve chairman Alan Greenspan and other economists, however, are hopeful that companies will step up hiring.
"The last worry spot in the economy is the jobs situation," said Rick Egelton, economist at BMO Financial Group. "But I think we'll see a rebound this spring. U.S. companies have restructured to get their financial houses in order. Their balance sheets look much better. They are starting to invest again."
To that end, it was especially encouraging that businesses boosted investment in equipment and software in the fourth quarter at a 15.1 percent annual rate. That was stronger than the 10 percent rate first estimated and was a main factor in the GDP being revised upward for the fourth quarter.
Economists are heartened that businesses appear to be doing more to keep the economy going. Throughout economic hard times and during most of the recovery consumers have been doing the heavy lifting.
In the fourth quarter, consumers spent modestly and increased their spending at a 2.7 percent annual rate, slightly stronger than the 2.6 percent pace estimated a month ago. But they trimmed spending on big-ticket goods, such as cars, at a 0.1 percent rate in the fourth quarter, the first decline since the second quarter of 2000.
Although economists think consumers will keep their pocketbooks sufficiently open to help along the economy, they are still keeping a close eye on their behavior. Some economists worry that consumers, whose confidence in the economy took a hit in February, might turn more cautious.
The University of Michigan reported Friday that its consumer sentiment index slid to 94.4 from 103.8 in January. An AP-Ipsos consumer confidence index released this month and a Conference Board measure released this week also showed consumers felt less confident in the economy in February.
