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GDP numbers indicate U.S. economy hitting its stride
WASHINGTON (1/31/14)--U.S. gross domestic product--which measures output produced in the U.S.--grew at a rate of 3.2% in the fourth quarter, down from the third quarter's 4.1% pace but in line with economists' predictions, according to data released Thursday by the Bureau of Economic Analysis.
 
The economy grew at a 1.9% pace across 2013, compared with a 2.8% rate in 2012. The last time the growth rate was above 3% annually was 2005, when it reached 3.4%. The Federal Reserve has forecast the economy will grow between 2.8% and 3.2% this year (The Wall Street Journal Jan. 30)
 
Strong spending by consumers and businesses and an increase in exports helped drive fourth-quarter growth and offset declines in the government and residential sectors. Imports--which decrease the GDP--rose in the fourth quarter, but they were offset by higher exports.
 
Personal consumption expenditures, which account for more than two-thirds of GDP, moved upward by 3.3%, the strongest increase in three years. Purchases of services and nondurable goods such clothing and footwear helped offset cutbacks in autos and household goods.
 
Real disposable income increased 0.8%, down from a 3% gain in the prior quarter. Since spending growth outpaced that of income, the saving rate fell from to 4.3% from 4.9% (Moody's Economy.com Jan. 30)
 
Businesses boosted spending by 3.8%, but growth was restrained by reduced inventory investment. Inventories remained elevated in the fourth quarter because businesses boosted their stockpiles in the prior three months.
 
Many companies are focusing on short-term projects or replacing existing equipment but aren't adding capacity, said Wells Fargo chief economist John Silvia ahead of the report.
Residential investment decreased by 9.8%. Colder weather may have slowed construction, economists said.
 
The price index for personal consumer expenditures--a measure of inflation--rose at a 0.7% annual rate in the fourth quarter--below the Fed's 2% annual target.


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