* Fourth-quarter GDP revised higher to 0.1 pct growth rate
* Consumer spending rises at 2.1 pct annual rate
* Jobless claims fall to 344,000 in latest week
By Jason Lange
WASHINGTON, Feb 28 The U.S. economy barely grew
in the fourth quarter as the military slashed spending and
companies restocked their shelves with less gusto, but growth
already appears to be picking up.
The Commerce Department said on Thursday the economy
expanded at a 0.1 percent annual rate in the last three months
of 2012, scratching an earlier estimate that had showed a small
The growth rate was the slowest since the first quarter of
2011 and fell short of the 0.5 percent economists had expected.
But consumer spending, while not stellar, was comparatively
robust and economists see signs the factors that restrained
growth late last year are already reversing in the first
quarter. A month ago, the government had said the economy
contracted at a 0.1 percent pace.
"The details of the report bode well for the beginning of
this year," said Harm Bandholz, an economist at UniCredit in New
Indeed, other reports on Thursday showed a drop in new
claims for jobless benefits last week and a sharp rise in
factory activity in the Midwest, adding to a string of recent
data that suggests the economy improved early this year.
The GDP report showed consumer spending expanded at a 2.1
percent annual rate in the fourth quarter. That suggests modest
underlying momentum in the economy as it entered the first
quarter, when a significant tightening of fiscal policy began.
Inventories subtracted 1.6 percentage points from the GDP
growth rate during the fourth quarter, while defense spending
plunged 22 percent, shaving 1.3 points off growth. Many
economists expect both of those categories to add to growth in
the first three months of the year.
The drag from inventories was actually greater late last
year than initially estimated, suggesting an even sharper
rebound is due in the first quarter.
Data on retail sales and on housing have suggested a tax
hike enacted in January did not deal a big blow to households,
and most economists think growth will pick up later this year
despite a wave of federal spending cuts due to begin on Friday.
POCKETS OF STRENGTH
There were some relatively bright spots in the GDP data.
Imports fell 4.5 percent during the period, which added to
the overall growth rate because it was a larger drop than in the
third quarter. Buying goods from foreigners bleeds money from
the economy, subtracting from economic growth.
At the same time, exports did not fall as much as the
government had thought when it released its earlier estimate.
Exports have been hampered by a recession in Europe, a cooling
Chinese economy and storm-related port disruptions.
Excluding the volatile inventories component, GDP rose at a
revised 1.7 percent rate, in line with expectations. These final
sales of goods and services had been previously estimated to
have increased at a 1.1 percent pace.
Business spending was revised to show more growth during the
period than initially thought, adding about a percentage point
to the growth rate.
Growth in home building was revised slightly higher to a
17.5 percent annual rate. Residential construction is one of the
brighter spots in the economy and is benefiting from the Federal
Reserve's ultra-easy monetary policy stance, which has driven
mortgage rates to record lows.
JOBLESS CLAIMS FALL
A separate report showed the number of Americans filing new
claims for unemployment benefits fell more than expected last
week, suggesting some traction in the labor market recovery.
Initial claims for state jobless benefits dropped 22,000 to
a seasonally adjusted 344,000, the Labor Department said.
Economists polled by Reuters had expected first-time
applications to fall to 360,000.
While the level of jobless claims is near where it was in
the early days of the 2007-09 recession, hiring has remained
quite lackluster. Job gains have averaged 177,000 per month over
the past six months.
High unemployment prompted the U.S. central bank last year
to launch an open-ended bond buying program that it said it
would keep up until it saw a substantial improvement in the
outlook for the labor market.
In a separate report, the Institute for Supply
Management-Chicago said the pace of business activity in the
U.S. Midwest rose to its highest level in nearly a year in
February as new orders increased.