Economy
Grows at 4% Rate in Final Quarter of 2003
By Fred Barbash
Washington Post Staff Writer
Friday, January 30, 2004; 10:50 AM
The nation's economy continued expanding broadly at a healthy 4 percent
pace in the last three months of 2003.
Even though growth was somewhat weaker than some had predicted, most analysts
said the economy remained on a solid upward track. The Commerce Department's
gross domestic product numbers showed that inflation was muted while personal
spending was brisk, albeit not as brisk as it was during the previous quarter.
Businesses continued pouring money into computers and software. And exports
by U.S. businesses were up, thanks to the declining value of the dollar overseas,
which makes American products cheaper. For all of 2003, the economy grew
by a solid 3.1 percent. That marked an improvement over the 2.2 percent increase
registered in 2002 and represented the strongest showing since 2000. The
gross domestic product reflects the total of all measurable economic activity
in the United States, including buying, selling and earning by both individuals
and businesses. It is considered the broadest indicator of the overall health
of the economy. Today's figures are preliminary and subject to revision next month.
They showed that the economy grew at an annualized rate of 4 percent in
the fourth quarter of last year. It was not the blistering 8.2 percent
rate for the previous quarter, but no one had thought it would be. Third quarter
growth was due to temporary boosts from income tax cuts, mortgage refinancing
and car sales. Nor was it as high as the 5 percent growth rate some analysts
had predicted. But economists said today's numbers showed the economy was
still on track, even "impressive," said Jade Zelnik, chief economist for RBS Greenwich
Capital. "In some respects," she said, the figure "reinforces the prospects
for healthy growth ahead" because the Commerce Department's survey showed that
businesses have yet to restock inventories. Assuming demand keeps up, she and
others suggested, restocking may now begin.
Prospects for steady demand were reinforced today by the University of Michigan's
consumer sentiment survey, which rose to the highest level since November 2000,
meaning that consumers are optimistic. "Consumers are feeling a lot better
about things, which in the very short term suggests spending is not going to collapse
or weaken appreciably," Joseph Lavorgna, a senior economist at Deutsche Bank Securities
Inc. in New York told the Bloomberg news service. Analysts said the figures
probably leave the political landscape unchanged. The Bush administration has
been using the rate of economic growth to claim credit for an economic recovery.
Democrats have pounded on a loss of jobs during the Bush administration. The
slowing of growth in the quarter primarily reflected a slowing of personal spending
compared with the previous quarter, the Commerce Department's Bureau of Economic
Analysis said in a release. "Of course, growth was going to slow from the
heated third quarter pace," Brian Nottage of Economy.com wrote in an analysis
this morning. But consumer spending nevertheless rose by 2.6 percent. That was
"more impressive than it seems," he said. "Third quarter spending was jacked
up by massive auto incentives and tax rebate checks. It is a testament to the
relative strength of this year's holiday season that fourth quarter spending actually
managed to post decent growth from that elevated level." Zelnik thought
the Federal reserve would be soothed by the numbers and less inclined to contemplate
raising interest rates. "From the Fed standpoint this is still the best
of both worlds," she said. "Growth wasn't five percent or higher. . . . But we've
got solid growth and prospects for continued healthy growth and at the same time
there was every indication that inflation is dormant." Continue with: | 
