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 Gross domestic product probably grew at a 3.2 percent annual rate,
according to a Reuters poll of economists.
While that would be a slowdown from the third-quarter's brisk 4.1
percent pace, it would be a far stronger performance than earlier
anticipated, and welcome news in light of the drag from October's
partial government shutdown and a likely much smaller contribution
to growth from a restocking by businesses.
"It looks like the economy was firing on a lot of cylinders in the
fourth quarter," said John Ryding, chief economist at RDQ Economics
in New York.
Earlier in the quarter many economists were anticipating a growth
pace below 2 percent given that an inventory surge accounted for
much of the increase in the July-September period.
"We are more than four-and-a-half years into the recovery. Its death
has been called a thousand times, it hasn't happened. It comes to a
point where people go back to more normal behavior," said Ryding.
If economists' fourth-quarter estimates are correct, growth over the
second half of the year would come in at a 3.7 percent pace, up
sharply from 1.8 percent in the first six months and well above the
2.2 percent average since the recovery started in mid-2009.
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 advance fourth-quarter GDP
report at 8:30 a.m. on Thursday, a day after the Federal Reserve
said "growth in economic activity picked up in recent quarters."
The Fed on Wednesday announced another reduction to its monthly bond
purchases and appeared to shrug off a surprise sharp slowdown in job
growth in December.
Consumer spending is forecast rising 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,
advanced at a 2 percent pace in the third quarter.
ROBUST FINAL DEMAND
The sturdy increase in final demand should put the economy on a
stronger growth path this year. However, a lack of wage growth could
take some edge off consumer spending early in the year.
A feared inventory correction, which did not materialize in the
fourth quarter, is now likely to show up in the first three months
of the year and weigh on growth, economists said.
In addition, business investment is expected to moderate, given a
surprise tumble in orders for capital goods excluding defense and
aircraft in December.
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Despite that drop, business spending on equipment likely accelerated
in the fourth quarter after rising at only a 0.2 percent pace in the
prior three months.
"We are not completely out of the woods. We would really like to see
stronger wage growth and corporate investment before declaring full
'escape velocity'," said Thomas Costerg, a U.S. economist at
Standard Chartered Bank in New York.
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.
Wage growth has been stagnant as the economy deals with slack in the
labor market. Sluggish wages likely kept inflation pressures benign
in the fourth quarter. 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.
The economy in the last quarter also likely got a boost from
exports, thanks to firmer global growth. That, together with
declining petroleum imports likely narrowed the trade deficit.
Some slowing is expected in the growth of business spending on
nonresidential structures in the fourth quarter. A run-up in
mortgage rates, which held back home sales and renovations, could
see residential investment falling for the first time since the
third quarter of 2010.
Government spending probably contracted, reflecting a 16-day partial
shutdown of the federal government in October.
(Reporting by Lucia Mutikani; editing by Andrea Ricci)
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