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U.S. Economy Grew at a 2.8% Rate in Fourth Quarter, Survey Says
Jan. 27 (Bloomberg) -- The U.S. economy lumbered into 2006, growing 2.8 percent in the fourth quarter as consumers spent at the slowest pace in 14 years, according to a survey of economists before a government report today.
The forecast for gross domestic product, the sum of all goods and services produced in the U.S., is based on the median estimate of 72 economists in a Bloomberg News survey before the report from the Commerce Department. It would mark the weakest three months since the first quarter of 2003 and follows a 4.1 percent annual rate in the third quarter.
The slowdown will prove temporary as business investment has shown signs of gaining steam and consumer spending rebounds with improvement in the job market, economists said. The root of the fourth-quarter slowdown was a slump in October automobile sales. Purchases of vehicles and holiday merchandise strengthened later in the quarter.
``Fourth-quarter growth is going to be softer, primarily because of lower consumer spending, but we expect better growth this quarter,'' said John Shin, an economist at Lehman Brothers Inc. in New York. ``A major part of it is the sharp drop in auto sales, and we wouldn't expect to see that again.''
The Commerce Department is scheduled to release its first estimate of the quarter's growth at 8:30 a.m. in Washington. Forecasts in the survey ranged from 1.9 percent to 3.4 percent. GDP will be revised twice as more data come in.
New Home Sales
Later this morning, the Commerce Department will issue a report on new home sales in December. Purchases probably fell 1.6 percent during the month to a 1.225 million annual rate, the median of 62 economists' forecasts in a Bloomberg News survey.
The pace would be the slowest since January of last year and follows a 1.245 million rate in November. The projected pace still would leave new home sales at a record for a fifth consecutive year.
The slowdown in October through December snapped 10 straight quarters of growth exceeding 3 percent. That was the longest such string since the 13 quarters that ended in March 1986. Growth will pick right back up this quarter, to a 3.8 percent annual rate, and average 3.4 percent this year, according to a survey of economists in a Bloomberg survey of economists from Dec. 23 to Jan. 9.
Business momentum is ``very strong,'' and sales this month are ``tracking very well,'' Lew Frankfort, chief executive of Coach Inc., said in an interview yesterday. New York-based Coach is the largest U.S. seller of luxury-leather goods.
Price Indexes
The report, which includes price indexes, will be the last that Federal Reserve policy makers see before their Jan. 31 meeting on interest rates. All 39 economists in a Bloomberg survey forecast a quarter-point increase in their benchmark lending rate, to 4.5 percent.
The GDP price index in the Commerce Department's fourth- quarter report is forecast to rise at a 2.7 percent annual pace, slower than the 3.3 percent increase in July through September, according to the Bloomberg survey median. Economists will watch the so-called core measure of a separate price index tied to personal consumption, which Fed policy makers say is their inflation measure of choice.
The core personal consumption expenditures index rose at a 1.4 percent annual rate in the third quarter after a 1.7 percent pace in the second quarter.
Consumer spending accounts for about 70 percent of the economy and it probably grew at a 0.4 percent annual pace last quarter, the slowest since the last three months of 1991, based on the median estimate in the survey. Spending rose at a 4.1 percent annual pace in the previous three months.
Auto Sales
Cars and light trucks sold at a 14.7 million annual rate in October, the fewest since August 1998, after automakers withdrew incentives that extended employee pricing to all customers. General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler unit announced new discount programs in November to help spur sales, which climbed to a 15.7 million annual rate during the month and a 17.2 million rate in December.
A wider trade deficit and less homebuilding also subtracted from growth in the quarter, according to economists. Inventory rebuilding in the fourth quarter probably contributed to growth for the first time since the January-March quarter, according to Mike Moran, chief economist at Daiwa Securities America Inc. in New York. Growth was also supported by business investment in equipment and government spending, some economists said.
Demand
Demand for goods and services is on the mend, according to a National Association of Business Economics report this week. The group's survey of 142 companies showed the economy gaining traction after shaking off three hurricanes last year, and more panelists than in the group's October report expected growth to accelerate. Half the companies said they planned to increase capital spending over the next 12 months, up from 48 percent in October, the survey said.
Dallas-based Texas Instruments Inc., the world's biggest maker of mobile-phone chips, said fourth-quarter sales were at the lower end of the company's December forecast because facilities weren't able to keep up with demand.
``The miss is almost entirely attributable to the bottlenecks'' at test assembly factories, Texas Instruments Chief Financial Officer Kevin March said on a Jan. 23 conference call with analysts. ``We feel pretty good with the numbers that we're putting out for the first quarter.''
U.S. Economy Grew at a 2.8% Rate in Fourth Quarter, Survey Says
Jan. 27 (Bloomberg) -- The U.S. economy lumbered into 2006, growing 2.8 percent in the fourth quarter as consumers spent at the slowest pace in 14 years, according to a survey of economists before a government report today.
The forecast for gross domestic product, the sum of all goods and services produced in the U.S., is based on the median estimate of 72 economists in a Bloomberg News survey before the report from the Commerce Department. It would mark the weakest three months since the first quarter of 2003 and follows a 4.1 percent annual rate in the third quarter.
The slowdown will prove temporary as business investment has shown signs of gaining steam and consumer spending rebounds with improvement in the job market, economists said. The root of the fourth-quarter slowdown was a slump in October automobile sales. Purchases of vehicles and holiday merchandise strengthened later in the quarter.
``Fourth-quarter growth is going to be softer, primarily because of lower consumer spending, but we expect better growth this quarter,'' said John Shin, an economist at Lehman Brothers Inc. in New York. ``A major part of it is the sharp drop in auto sales, and we wouldn't expect to see that again.''
The Commerce Department is scheduled to release its first estimate of the quarter's growth at 8:30 a.m. in Washington. Forecasts in the survey ranged from 1.9 percent to 3.4 percent. GDP will be revised twice as more data come in.
New Home Sales
Later this morning, the Commerce Department will issue a report on new home sales in December. Purchases probably fell 1.6 percent during the month to a 1.225 million annual rate, the median of 62 economists' forecasts in a Bloomberg News survey.
The pace would be the slowest since January of last year and follows a 1.245 million rate in November. The projected pace still would leave new home sales at a record for a fifth consecutive year.
The slowdown in October through December snapped 10 straight quarters of growth exceeding 3 percent. That was the longest such string since the 13 quarters that ended in March 1986. Growth will pick right back up this quarter, to a 3.8 percent annual rate, and average 3.4 percent this year, according to a survey of economists in a Bloomberg survey of economists from Dec. 23 to Jan. 9.
Business momentum is ``very strong,'' and sales this month are ``tracking very well,'' Lew Frankfort, chief executive of Coach Inc., said in an interview yesterday. New York-based Coach is the largest U.S. seller of luxury-leather goods.
Price Indexes
The report, which includes price indexes, will be the last that Federal Reserve policy makers see before their Jan. 31 meeting on interest rates. All 39 economists in a Bloomberg survey forecast a quarter-point increase in their benchmark lending rate, to 4.5 percent.
The GDP price index in the Commerce Department's fourth- quarter report is forecast to rise at a 2.7 percent annual pace, slower than the 3.3 percent increase in July through September, according to the Bloomberg survey median. Economists will watch the so-called core measure of a separate price index tied to personal consumption, which Fed policy makers say is their inflation measure of choice.
The core personal consumption expenditures index rose at a 1.4 percent annual rate in the third quarter after a 1.7 percent pace in the second quarter.
Consumer spending accounts for about 70 percent of the economy and it probably grew at a 0.4 percent annual pace last quarter, the slowest since the last three months of 1991, based on the median estimate in the survey. Spending rose at a 4.1 percent annual pace in the previous three months.
Auto Sales
Cars and light trucks sold at a 14.7 million annual rate in October, the fewest since August 1998, after automakers withdrew incentives that extended employee pricing to all customers. General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler unit announced new discount programs in November to help spur sales, which climbed to a 15.7 million annual rate during the month and a 17.2 million rate in December.
A wider trade deficit and less homebuilding also subtracted from growth in the quarter, according to economists. Inventory rebuilding in the fourth quarter probably contributed to growth for the first time since the January-March quarter, according to Mike Moran, chief economist at Daiwa Securities America Inc. in New York. Growth was also supported by business investment in equipment and government spending, some economists said.
Demand
Demand for goods and services is on the mend, according to a National Association of Business Economics report this week. The group's survey of 142 companies showed the economy gaining traction after shaking off three hurricanes last year, and more panelists than in the group's October report expected growth to accelerate. Half the companies said they planned to increase capital spending over the next 12 months, up from 48 percent in October, the survey said.
Dallas-based Texas Instruments Inc., the world's biggest maker of mobile-phone chips, said fourth-quarter sales were at the lower end of the company's December forecast because facilities weren't able to keep up with demand.
``The miss is almost entirely attributable to the bottlenecks'' at test assembly factories, Texas Instruments Chief Financial Officer Kevin March said on a Jan. 23 conference call with analysts. ``We feel pretty good with the numbers that we're putting out for the first quarter.''
posted by Jones Lang LaSalle NJ News Blog at 10:44 AM
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