WASHINGTON (Reuters) - Less restocking by businesses and weaker global demand likely held back economic growth in the fourth quarter but consumer spending probably picked up to help keep the recovery intact.
Gross domestic product probably grew at a 1.1 percent annual rate, a step down from the third quarter's brisk 3.1 percent pace, according to a Reuters poll of economists. That would be the slowest growth rate in nearly two years.
"The recovery is expected to have ground to a near halt in the fourth quarter mostly due to the unfavorable global environment and a slowdown in inventory accumulation," said Millan Mulraine, a senior economist at TD Securities in New York.
The Commerce Department will release the fourth-quarter GDP report on Wednesday at 8:30 a.m (1330 GMT).
Despite the anticipated overall weak GDP figure, consumer and business spending are expected to show surprising resilience, given that the economy was on the brink of a so-called fiscal cliff, underscoring some fundamental strength in the economy.
The government lessened the blow the recovery would have taken from the $600 billion "cliff" of scheduled government spending cuts and tax hikes, but taxes still went up for many Americans and the spending cuts were only deferred.
Peter D'Antonio, an economist at Citigroup in New York, said signs domestic demand was well maintained "implies the economy will be able to withstand the hit from a new fiscal drag."
Tepid demand in the third quarter left businesses with unwanted stock in their warehouses and little incentive to accumulate more inventory in the final three months of the year.
Economists estimate that a slowdown in inventory accumulation could slash as much as a full percentage point from fourth-quarter GDP growth. Inventories added almost three-quarters of a percentage point in the July-September period.
With data available so far showing a decline in exports in the fourth quarter, trade will weigh on growth. Export growth has been hampered by a recession in much of debt-stricken Europe and a cooling Chinese economy.
Economists expect trade will subtract at least 0.3 percentage point from fourth-quarter GDP growth.
Another drag to growth is expected to come from government spending, where defense outlays are seen reversing the prior quarter's robust growth. Government spending is seen contracting at a pace of at least 3 percent after expanding 3.9 percent.
A huge storm that struck the East Coast in late October is expected to have proved a further weight on output.
Elsewhere, details of the report should be fairly encouraging. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, is expected to have accelerated from the prior quarter's 1.6 percent growth pace.
A rebound in business investment is expected after outlays fell in the third quarter for the first time in 1-1/2 years.
"None of these developments suggest a worrisome weakening in U.S. fundamentals," said Omair Sharif, an economist at RBS in Stamford, Connecticut.
A measure of underlying domestic demand, which excludes inventories and trade, is expected to have quickened a bit from the third quarter's 1.9 percent rate.
But consumer spending could come under pressure in the first half of this year given that Congress let a temporary payroll tax cut expire at the end of 2012.
Businesses could also pull back given uncertainty over how deeply Washington may cut spending and the likelihood of a protracted fight over raising the nation's debt ceiling.
"Assuming Washington does not derail the economy, we do see a pick-up in the pace of growth in the second half of the year led by the private sector on strengthening consumption, housing and released pent-up demand of capital expenditures," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
The housing market was another bright spot during the fourth quarter. Investment in residential construction is expected to have gained momentum after notching a 13.5 percent pace in the third quarter.
Homebuilding is expected to have added to growth last year for the first time since 2005 and its continued recovery should help ensure the economy remains on a modest growth path despite headwinds.
Reporting by Lucia Mutikani; Editing by James Dalgleish