WASHINGTON, March 29 The U.S. economy expanded
as expected in the fourth quarter while personal income grew at
a much faster pace than previously thought, which should help
underpin spending this quarter.
Gross domestic product increased at a 3.0 percent annual
rate, the quickest pace since the second quarter of 2010, the
Commerce Department said in its final estimate on Thursday,
unrevised from last month's estimate.
That was in line with economists' expectations. The economy
grew at a 1.8 percent rate in the third quarter.
However, personal income was $13.162 trillion at a
seasonally adjusted annual rate, $3.3 billion more than
previously reported. Disposable income was $10.6 billion more
than previously thought, likely reflecting the strengthening
Gross domestic income, which measures output from the income
side, increased at a 4.4 percent rate - the fastest since the
first quarter of 2010 - from a 2.6 percent rise in the third
The department also said after-tax profits increased at a
1.1 percent rate, slowing from 2.7 percent the prior quarter.
The slowdown in profits reflects the increase in wage costs as
companies step up hiring.
Rising incomes should help to cushion consumer spending
against surging gasoline prices. Spending, which accounts for
about 70 percent of U.S. economic activity, grew at an unrevised
2.1 percent pace in the fourth quarter.
While the economy grew solidly in the final three months of
2011, momentum has slowed this quarter amid signs of cooling in
manufacturing, business spending and a pause in the housing
market recovery - even as the labor market strengthens.
Federal Reserve Chairman Ben Bernanke this week said growth
needed to accelerate to bring the unemployment rate down
further. While he offered no sign that the U.S. central bank
would launch a third round of bond purchases or quantitative
easing, Bernanke said all options remained on the table.
First-quarter growth is seen around 2 percent, also as the
economy loses the boost from restocking by businesses. However,
rising gasoline prices are a wild card.
So far there is little sign that consumers have cut back,
with auto sales surging in both January and February.
The build-up in business inventories accounted for the bulk
of the rise in output in the last quarter. But the final GDP
revisions showed a slightly better tone in the overall growth
Business spending was revised up to a 5.2 percent growth
rate from 2.8 percent, to account for slightly stronger
investment in equipment and software. That offset weaker export
There were also small upward revisions to spending on home
building projects. Though home sales stumbled in February, the
housing market is slowly recovering and homebuilding is expected
to contribute to growth this year for the first time since 2005.
While the rebuilding of inventories added a hefty 1.81
percentage points to GDP in the last quarter, the pace of
accumulation was not as fast as previously reported. Business
inventories increased $52.2 billion, instead of $54.3 billion.
Excluding inventories, the economy grew at an unrevised 1.1
percent rate. That was a sharp step-down from the prior period's
3.2 percent pace.