It must have really pained CNN to report this.
GDP growth revised up
Report puts fourth-quarter growth rate at 3.8 percent, up sharply from prior 3.1 percent estimate.
February 25, 2005: 10:12 AM EST
cnn.com
WASHINGTON (Reuters) - The U.S. economy grew at a 3.8 percent annual rate in the fourth quarter, the government reported Friday, much stronger than previously estimated due to a stronger trade and investment performance.
The Commerce Department said gross domestic product, the broadest measure of the nation's economy, grew at the revised rate rather than the 3.1 percent reported a month ago. That was slightly stronger than the 3.7 percent rate that Wall Street economists had forecast and only a small decline from the third quarter's 4 percent pace.
Nearly half the revision stemmed from a stronger trade performance, reflecting more robust exports than previously thought.
Statistics Canada corrected a $1.4 billion error in underestimating U.S. exports to Canada during November, and later data also showed the U.S. trade deficit for December narrowed more than had been anticipated.
Despite the fourth-quarter revision, there was no change in the government's calculation that GDP grew 4.4 percent in 2004, much stronger than the 3 percent increase in 2003 and the strongest for any year since 1999, when it expanded 4.5 percent.
Inflation showed signs of perking up in the fourth quarter. A price index favored by Federal Reserve Chairman Alan Greenspan -- personal spending minus food and energy costs -- increased at a 1.6 percent annual rate that was close to twice the 0.9 percent gain recorded in the third quarter.
Businesses kept up a brisk pace of new investment. Nonresidential investment climbed at a revised 14 percent rate instead of 10.3 percent reported a month ago and was ahead of the third quarter's 13 percent.
Spending on new equipment and computer software increased 18 percent after growing 17.5 percent in the third quarter.
But growth in consumer spending was revised down modestly to 4.2 percent from a previously reported 4.6 percent rise in the fourth quarter and was less vigorous than the third quarter's 5.1 percent gain.
Most analysts believe the economy has enough strength to keep expanding at around a 4 percent annual rate in the first half of 2005. The Federal Reserve has been gradually ratcheting interest rates up, aiming to bring them to more normal levels as the economic expansion following the 2001 recession is extended.
The Fed's trend setting federal funds rate currently is at 2.5 percent, relatively low by historical standards, and recent minutes from Fed policy-setting meetings have indicated some concern that prices are on the rise.
Economist David Resler of Nomura Securities International in New York said the only surprise was the downward revision in consumer spending strength but he discounted its impact.
"More important are the developments for the first quarter -- with durable goods being strong yesterday we could be looking at first quarter GDP of about 4 percent," Resler predicted. The Commerce Department said Thursday that new orders for costly durable goods excluding transportation were up by 0.8 percent in January.
Investor reaction to the GDP report was muted.
On Wall Street, stocks were little changed in the early going.
Bond prices were flat and the dollar rose versus the euro but fell against the yen.
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