Posted on 02/25/2005 9:14:56 AM PST by wingblade
Pace of US economic growth bolstered by stronger exports
WASHINGTON (AFP) - Although the pace of US economic growth slowed during the last quarter of 2004, it motored along at a far faster clip than previously thought, according to a fresh government estimate.
The Commerce Department said the economy grew at a slightly better than expected annual rate of 3.8 percent in the fourth quarter of 2004, as it issued its first revision to an initial estimate that the economy had expanded at a 3.1 percent rate.
The re-reading of the country's economic health was marginally better than some Wall Street analysts had expected amid forecasts the government's revision would strike 3.7 percent.
"We're not surprised by the revision, for the most part many people understood that this number would come close to four percent," said Drew Matus, a New York-based economist at Lehman Brothers.
"What this number tells us is it confirms a lot of what we knew which is that inflation in the fourth quarter did not accelerate much, and the US economy is reasonably set for good growth in the first quarter," Matus said.
Lehman expects US growth to hit 3.7 percent in the first quarter.
The government left its growth estimate for 2004 pegged at 4.4 percent: The strongest gain in growth since 1999.
The big upward revision to fourth quarter growth was largely driven by higher exports, fueled by the continued weakness of the US dollar, and higher business spending than previously realized.
The spike in the growth estimate also shows that the world's largest economy slowed down by much less than thought in the fourth quarter compared with the 4.0 percent growth clip recorded in the third quarter of last year.
However, the upward revision was practically an open secret and was even hinted at by US Treasury Secretary John Snow as recently as Wednesday. Snow had said a "stronger performance of exports" would likely propel an improved economic snapshot.
Many economists expected growth to be pegged higher after the Canadian government said last month that it had miscalculated US imports in November to the tune of 1.3 billion dollars. The US uses Canadian data to assess its growth estimates.
Driving the overall reading higher Friday was a revision to US exports which the government said rose 2.4 percent in the fourth quarter, compared to an initial estimate that exports had fallen 3.9 percent.
The deceleration in economic momentum from the third quarter reflected a moderation in consumer spending and the widening US trade deficit.
The revision showed consumer spending -- which accounts for some two-thirds of economic growth -- in the fourth quarter increased at a 4.2 percent rate, weaker than the initial reading of 4.6 percent and slower than the third-quarter's 5.1 percent clip.
The outlook for inflation was unchanged.
The personal consumption expenditure price deflator rose 2.5 percent in the fourth quarter, while the core rate --which excludes volatile food and energy prices -- increased at an annualized 1.6 percent rate.
The higher reading of US growth appears to reaffirm the Federal Reserve's perspective that the economy is on a "solid" growth path.
The Fed hiked key short-term interest rates by a quarter-point to 2.50 percent on February 2 and the minutes of its February meeting, released Wednesday, showed policymakers believed "the economy expanded at a solid pace in recent months."
Where are the currency-deflation hysterics when ya need 'em?
1) Funny how the better news for incumbent Republicans always comes after the election ...
2) Willie Green "We're doomed!" ping, anyone?
Related threads:
New Labor Department Report Reflects Bush Administration's Lack of Seriousness...
White House Economic Conference Misreads Current Economic Conditions
"We're dooooomed!"
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