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 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.
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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)
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