The economy in the U.S. managed to barely expand in the fourth quarter, erasing a previously estimated contraction, as the smallest trade deficit in almost three years helped overcome the biggest plunge in defense spending since the Vietnam War era.
Gross domestic product grew at a 0.1 percent annual rate, up from a previously estimated 0.1 percent drop, revised figures from the Commerce Department showed today in Washington. The median forecast of 83 economists surveyed by Bloomberg called for a 0.5 percent gain. Federal military outlays declined at a 22 percent annual pace, the biggest decrease since 1972.
The pace of growth indicates Federal Reserve policy makers are likely to maintain asset purchases intended to boost the expansion, which may be curbed by automatic government spending cuts set to take effect tomorrow. At the same time, healing in the residential real estate market and sustained gains in consumer spending even as the payroll tax rose show the economy probably picked up at the start of this year.
“Once we get past some of these headwinds at the beginning of the year, we should be OK,” Michael Carey, chief economist at Credit Agricole CIB in New York, said before the report. Carey is the second-best forecaster of U.S. growth for the past two years, according to data compiled by Bloomberg. “You’ve got the sectors that are continuing to perform relatively well like housing. Auto sales are benefiting from the Fed’s policy of keeping rates relatively low.”
Survey Results
Economists’ projections for GDP, the value of all goods and services produced, ranged from a 0.1 percent drop to a gain of 1 percent. The estimate is the second of three for the quarter, with the final release scheduled for the end of March when more information becomes available.
GDP grew 3.1 percent in the third quarter. For all of 2012, the economy expanded 2.2 percent after a 1.8 percent increase in the prior year.
The report reflected a revision to trade to now show a decline in the difference between exports and imports. The trade deficit shrank to $387.9 billion, the smallest since the first quarter of 2010, from $395.2 billion in the previous three months. The narrowing contributed 0.24 percent point to growth, a 0.49-point swing from the previously estimated drag.
That was partially offset by an even smaller gain in inventories than initially reported. Stockpiles grew at a revised $12 billion annual pace, down from a $20 billion rate estimated last month. The slowdown subtracted 1.55 percentage points from growth, 0.28-point more than reported last month.
Depleted inventories may signal a first-quarter pickup in production.