Gross domestic product growth will probably be lowered to a 2.5
percent annual rate, according to a Reuters poll of economists. That
would be down sharply from the 3.2 percent pace reported last month
and the 4.1 percent logged in the third quarter.
"The revision to the GDP number will better reflect the underlying
economic trend because the increases in inventories and exports that
massively lifted growth in the second half of the year were simply
not sustainable," said Harm Bandholz, chief U.S. economist at
UniCredit Research in New York.
The Commerce Department will release its fresh estimate of
fourth-quarter GDP at 8:30 a.m. (1330 GMT) on Friday.
It is not unusual for the government to make sharp revisions to GDP
numbers as it does not have complete data when it makes its initial
estimates. In fact, the figures on Friday will be subject to
revisions next month as more information is received.
If economists' forecasts are correct, Friday's revision will leave
GDP just above the economy's potential growth trend, which analysts
put somewhere between a 2 percent and 2.3 percent pace.
Trade is expected to account for a large chunk of the revision. A
report earlier this month showed exports fell in December, leading
to a bigger trade deficit in the fourth quarter than the government
Initial estimates had trade adding 1.33 percentage points to GDP
growth in the fourth quarter. Economists expect trade's contribution
will be cut down to about 1.0 percentage point.
"This is still a sizable contribution to GDP growth and the largest
since late 2010," said Ryan Sweet, a senior economist at Moody's
Analytics in West Chester, Pennsylvania.
INVENTORIES GIVE LESS OF A BOOST
Inventories, previously reported to have risen by $127.2 billion in
the fourth quarter, are likely to be revised down.
The reported increase in the stocks of unsold goods in the fourth
quarter was the largest in nearly 16 years and followed a gain of
$115.7 billion in the third quarter.
But economists expect the contribution to growth from inventories,
which the government put at 0.42 percentage point a month ago, could
be revised to just about two-tenths of a percentage point.
Downward revisions are also expected to consumer spending after data
showed weak retail sales in November and December. Consumer spending
had been estimated expanding at a 3.3 percent rate in the fourth
quarter, the fastest in three years.
[to top of second column]
That could be lowered to a pace of about 3 percent. Consumer
spending accounts for more than two-thirds of U.S. economic
activity. As a result, final domestic demand is likely to be revised
weaker than the 1.4 percent rate previously reported.
The loss of momentum appears to have spilled over into in the first
quarter, with an unusually cold winter weighing on retail sales,
home building and sales, hiring and industrial production.
The Federal Reserve, which has been cutting back on the amount of
money it is injecting into the economy through monthly bond
purchases, views the recent soft patch as temporary.
Fed Chair Janet Yellen told lawmakers on Thursday that severe
weather had played a role in the weakening of the data. She said,
however, that it would take a "significant change" to the economy's
prospects for the Fed to put plans to wind down its bond buying on
Despite the first quarter's weak start, economists remain optimistic
that growth this year will be the strongest since the recession
ended almost five years ago.
"We may have the headline GDP number revised down, but I would not
interpret that as a weakening in overall economic conditions. We
just have some headwinds," said Adolfo Laurenti, deputy chief
economist at Mesirow Financial in Chicago.
"I remain fairly optimistic about the outlook for 2014."
Government spending is likely to be revised downward, but the impact
will probably be offset by upward revisions to investment in
residential construction, nonresidential structures and business
spending on equipment.
(Reporting by Lucia Mutikani; Editing by Jan Paschal)
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.