* Fourth-quarter GDP growth forecast at 3.2 percent annual
rate
* Consumer spending seen accelerating but inflation stays
muted
* Inventories seen making modest contribution to growth
By Lucia Mutikani
WASHINGTON, Jan 28 (Reuters) – Rising household spending and
exports likely pushed the U.S. economy ahead at a decent clip in
the fourth quarter, building a foundation for stronger growth
this year.
Gross domestic product probably grew at a 3.2 percent annual
rate, according to a Reuters survey of economists. While that
expansion would be a step back from the third quarter’s brisk
4.1 percent pace, its composition is expected to be healthier.
More of the growth should come from final demand and less
from an accumulation of stocks in warehouses, although a further
increase in inventories is expected.
“Consumer spending was one of the solid supports. The other
was on the inventory front,” said Sam Bullard, a senior
economist at Wells Fargo Securities in Charlotte, North
Carolina.
In the third quarter, inventories rose $115.7 billion,
adding 1.67 percentage points to GDP growth, and many economists
expected an effort to sell off those stocks to bring growth to a
sub-2-percent pace in the fourth quarter.
But a jump in consumer spending made the third quarter
inventory build look prescient.
“A lot of people were expecting to see a swing the other way
of the same magnitude. That has proven not to be the case,”
Bullard said.
Consumer spending is expected to be the main driver of
fourth-quarter growth, but other segments of the economy such as
trade and business investment are also seen lending a hand.
The Commerce Department will release its first snapshot of
fourth-quarter GDP at 8:30 a.m. (1330 GMT) on Thursday, a day
after the Federal Reserve wraps up a two-day policy meeting.
The Fed gave the economy a vote of confidence last month,
announcing it would start to scale back its hefty monthly bond
purchases. It is expected to announce another reduction to the
program on Wednesday despite some recent weak data, including
reports on December employment and durable goods orders.
“We expect the Fed to stay the course on tapering, reducing
purchases by a further $10 billion per month, as they are likely
to look through the recent spate of disappointing economic
reports,” said Millan Mulraine, deputy chief economist at TD
Securities in New York.
CONSUMER SPENDING TO SHINE
Consumer spending was forecast to have risen at a pace as
fast as 4 percent, which would be the strongest in three years.
Consumer spending, which accounts for more than two-thirds of
U.S. economic activity, increased at a 2 percent pace in the
third quarter.
Despite the anticipated spending surge, inflation pressures
likely remained benign. A price index in the GDP report is
expected to have risen at a 0.7 percent rate, decelerating from
the third-quarter’s 1.9 percent pace.
A core measure that strips out food and energy costs likely
rose at a 1.1 percent rate after increasing at a 1.4 percent
pace in the July-September period.
“It’s really hard to get inflation without seeing any
upside pressure on wages, and to get that you need to see a
considerable decline and tightening in the jobs market,” said
Jacob Oubina, a senior economist at RBC Capital Markets in New
York.
Trade likely also gave growth a lift, thanks to firmer
global growth and declining petroleum imports, which narrowed
the trade deficit. The United States is ramping up domestic
energy production, reducing its dependency of foreign oil.
Business spending on equipment likely accelerated after
rising only at a 0.2 percent pace in the third quarter. However,
a report on Tuesday showing orders for capital goods, excluding
defense and aircraft, dropped in December suggested it would
cool.
“We might see a pullback in whatever growth we are going to
see from equipment in the fourth quarter. That’s going to be a
headwind to first-quarter growth,” said Wells Fargo Securities’
Bullard.
Even so, a lessening of the fiscal austerity that gripped
Washington last year should keep the economy on a firmer growth
path. Growth for the whole of this year is forecast at 2.9
percent, up from last year’s estimated 1.9 percent.
Some moderation is expected in business spending on
nonresidential structures in the fourth quarter.
A drop in brokers’ commissions tied to softer home sales
over the summer and weak spending on home improvements could see
residential investment falling for the first time since the
third quarter of 2010, even though homebuilding looked well
maintained.
Government spending likely fell, reflecting a 16-day partial
shutdown of the federal government in October.
(Reporting by Lucia Mutikani; Editing by James Dalgleish)
