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		U.S. Economy Grew at Slower-Than-Forecast 4 Percent Rate in Fourth Quarter Jan. 30 (Bloomberg) -- The U.S. economy expanded at a weaker- than-expected 4 percent annual pace from October through December as consumer spending slowed. Americans' confidence and a Chicago manufacturing index rose more than anticipated this month, suggesting faster growth this quarter. Gross domestic product, the value of all goods and services produced, rose at about half the pace of the third quarter, the Commerce Department said in Washington. The National Association of Purchasing Management-Chicago's factory index increased to 65.9, the highest in almost a decade, from December's 61.2. A reading above 50 signals growth. ``Although the gain in GDP was less than expected, this is still a robust report,'' said John Ryding, chief market economist at Bear Stearns & Co. in New York. ``We expect real GDP in the first quarter will be around 5 percent, fueled by continued growth in business spending.'' The 6.1 percent average growth pace in the last half of 2003 is the strongest since the first six months of 1984. Manufacturers including Texas Instruments Inc. are speeding production. Increased corporate spending and inventory rebuilding to meet demand suggests the world's largest economy is becoming less dependent on consumers as its main driver. Fourth-quarter growth was expected to slow to 5 percent, the median estimate in a Bloomberg News survey, from the previous three months' 8.2 percent expansion. Consumer spending slowed to a 2.6 percent annual pace from the third quarter's 6.9 percent, which was the largest jump since 1986. Americans remain upbeat. The University of Michigan's index of consumer sentiment rose to the highest since November 2000. The final measure for January was 103.8, compared with a preliminary reading of 103.2 and a final 92.6 in December. Treasury Secretary Snow Stocks fell and Treasuries rose following the reports. The 4 1/4 percent Treasury note due in November 2013 rose about 1/8, pushing down its yield 1 basis point to 4.16 percent at 11:31 a.m. in New York. The Dow Jones Industrial Average fell 62 points, or 0.6 percent. The economy will probably expand at a 4.4 percent annual pace this quarter, according to the median estimate of economists surveyed this month by Blue Chip Economic Indicators. It will grow 4.6 percent this year, the best performance since 1984, according to the consensus estimate. ``2003 ended with solid gains,'' Treasury Secretary John Snow said in a statement following the reports. ``We are seeing good economic news on many fronts and we are encouraged.'' Federal Reserve The personal consumption expenditures price index, a measure of inflation watched by Federal Reserve Chairman Alan Greenspan and other policy makers, rose at a 0.6 percent annual pace, down from 1.8 percent in the prior three months. Excluding food and energy, the core PCE rose 0.7 percent in the fourth quarter, the smallest rise since the fourth quarter of 1962, according to the Commerce Department. Fed policy makers, hoping to spur faster growth and generate jobs, have held their target interest rate at an almost 46-year low of 1 percent since June of last year. At the conclusion of their meeting this week, the central bankers said they would be ``patient'' in raising rates because inflation is tame. Today's GDP report showed a measure of prices tied to spending rose at the slowest pace in 41 years. ``There is enough growth to support much stronger job gains and that is largely what the Fed is watching,'' said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. Central bankers ``can be patient as long as inflation remains low, which it is.'' `No Doubt' For all of 2003, the economy expanded 3.1 percent, the most since 2000, after growing 2.2 percent the previous year. ``There is no doubt the economy has gotten much stronger,'' said James Hackett, chief executive officer at Anadarko Petroleum Corp., in a televised interview with Bloomberg News. Hackett is also a member of the board of directors of the Fed Bank in Dallas. ``I think you'll still continue to see positive growth through the course of this year.'' U.S. manufacturers are increasing production to keep up with demand after cutting inventories to a record low relative to sales. The NAPM-Chicago's new orders index rose this month to 69.7, the highest since 70.7 in July 1994, from 66.1 in December. The production index surged to 76.5, the best reading since 76.8 in January 1984, from 68.9 last month. Corporate Spending Business fixed investment, which includes spending on commercial construction as well as equipment and software, rose at a 6.9 percent annual rate in the fourth quarter, following a 12.8 percent increase a quarter earlier. The rise was led by a 10 percent increase in spending on new equipment. ``We see IT spending continuing to get better,'' said Gary Bloom, chief executive of Veritas Software Corp., the world's largest independent maker of data-storage programs, said in a televised interview with Bloomberg News yesterday. ``It's really the best IT spending climate it's been in about two years. We see a lot of great opportunities out there.'' Texas Instruments, the world's biggest maker of semiconductors that power mobile phones, said this week it had a fourth-quarter profit of $512 million as sales reached a three- year high. Companies boosted inventories at a $6.1 billion annual rate, compared with a $9.1 billion reduction in the third quarter. The increase added 0.61 percentage point to GDP. Tax Refunds The 2.6 jump in consumer spending, which accounts for 70 percent of the economy, was less than the 3 percent forecast by economists. Household purchases have been rising since the first quarter of 1992, a record-breaking stretch of 48 straight quarterly increases. It's risen at an average 3.6 percent per quarter in the last two decades. Adjusted for inflation, GDP totaled $10.597 trillion at an annual rate. Unadjusted for the change in prices, it totaled $11.246 trillion and rose at a 5.1 percent annual rate. The price deflator used to adjust the figures rose at a 1 percent annual rate during the quarter. Final sales, which exclude inventories, rose at a 3.4 percent annual pace last quarter, compared with an 8.3 percent jump in the previous three months, the Commerce report showed. A surge in tax refunds may boost consumer spending in the first six months of this year, according to economists at UBS Securities LLC in Stamford, Connecticut. Because last year's tax cuts were retroactive to January, government refunds may be boosted by about $25 billion this year, according to their forecasts. Housing Residential housing construction rose at a 10.6 percent annual rate last quarter following a 21.9 percent jump in the third quarter, according to today's report. Builders broke ground on more homes in December than at any time since February 1984, according to a report from the Commerce Department last week. American businesses sold $46.2 billion more goods and services abroad last quarter and bought $41.7 billion more items from foreign producers, today's report showed. That led to a $4.5 billion improvement in the trade balance, which contributed 0.19 percentage point to growth. Government spending rose at a 0.8 percent annual rate last quarter after rising 1.8 percent from July through September. Last Updated: January 30, 2004 11:57 EST   Back to Original Article: Mortgage News You Can Use   Continue with: Economy Grows at 4% Rate in Final Quarter of 2003 Economic Growth Report Pulls Down Dow 32 Treasuries Slip on Strong Chicago PMI Dollar Falls on Lower-Than-Expected GDP Fed, economists see improvement Hire expectations Dollar Firms, Buoyed by Economic Data Part One Dollar Firms, Buoyed by Economic Data Part Two Treasuries Up as Growth Falls Short Treasuries Up as Growth Falls Short part two
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