(Bloomberg News) The U.S. economy expanded less than forecast in the fourth quarter as consumers curbed spending and government agencies cut back, validating the Federal Reserve's decision to keep interest rates low for a longer period.
Gross domestic product, the value of all goods and services produced, climbed at a 2.8 percent annual pace following a 1.8 percent gain in the prior quarter, Commerce Department figures showed today in Washington. The median forecast of 79 economists surveyed by Bloomberg News called for a 3 percent increase. Excluding a jump in inventories, growth was 0.8 percent.
Fed officials this week said they were concerned about the economy's lack of vigor two years after the last recession ended, prompting a pledge to keep interest rates low at least until late 2014. Growth was still the fastest since the second quarter of 2010, showing that the world's largest economy has so far withstood the effects of the debt crisis in Europe.
"We're recovering, but it's a very long, slow, drawn-out process," said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, who correctly forecast the growth figure. "Relatively speaking, the U.S. is one of the few areas where we would expect to see growth in 2012 better than 2011."
The Standard & Poor's 500 Index fell 0.2 percent to 1,315.42 at 10:18 a.m. in New York. The yield on the 10-year Treasury was little changed at 1.93 percent.
The International Monetary Fund this week forecast the U.S. will expand 1.8 percent in 2012, compared with a 0.5 percent contraction in the 17-nation euro area and a 1.7 percent increase in Japan.
Growth projections for the U.S. in the Bloomberg survey ranged from 2.4 percent to 4.5 percent.
For all of 2011, the world's largest economy climbed 1.7 percent, down from 3 percent a year earlier.
Consumer spending rose 2 percent in the fourth quarter, little changed from the 1.7 percent gain in the prior three months. The median forecast of economists surveyed projected a 2.4 percent increase.
"Final demand was pretty soft," said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. "The need for consumers to rebuild savings may be a headwind, but at the same time, we're not seeing a collapse."