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Stock prices have surged. On Wednesday, the Standard & Poor's 500 index was within two points of its all-time high. All of that is making consumers feel wealthier, which could lead to more spending. Consumer spending drives 70 percent of economic activity. The Federal Reserve still thinks the economy needs aggressive measures to bolster growth. Last week it stood by its plan to keep a key short-term interest rate near zero until unemployment drops below 6.5 percent. The Fed also left unchanged its plan to keep buying $85 billion in bonds until it sees a substantial improvement in the job market. The slowdown in business inventories trimmed 1.5 percentage point from growth in the fourth quarter and the reductions in defense spending cut another 1.3 percentage point from growth. Consumer spending was growing at a 1.8 percent rate in the fourth quarter, slightly better than the 1.6 percent increase in the third quarter but down from last month's estimate that consumer spending was growing by 2.1 percent. That revision was offset by upward revisions in business investment spending on structures and equipment and by stronger sales of U.S. exports. The government first estimated two months ago that the economy had contracted at an annual rate of 0.1 percent in the fourth quarter, a decline that was erased by the revisions. The government will release its first look at first- quarter growth on April 26.
[Associated
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