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		Home Page 2 engines of growth power economy By Sue Kirchhoff, USA TODAY WASHINGTON — A long-awaited revival in business spending has finally taken root, helping support the economy as consumer spending slows from its recent torrid pace. Corporate investment has been growing faster than consumer spending since last spring and should lead the economy in 2004, says Donald Straszheim of Straszheim Global Advisors. Business spending rose at a nearly 7% annual rate in the fourth quarter of 2003, following better than 12% growth in the third quarter, while exports jumped 19%, the Commerce Department said Friday. Companies also began restocking warehouses late in 2003. Inventory rebuilding added to economic growth for the first time in more than a year — another sign executives are more confident about the outlook. Consumer spending makes up about three-fifths of the economy, business spending about 10%. Fueled by federal tax cuts, consumer purchases grew at a 6.9% annual rate in the third quarter of 2003 but slowed to a 2.6% pace in the fourth quarter. "Consumer spending in 2004 will be OK. It won't be as robust as earlier in this recovery," Straszheim says. Gross domestic product, the broadest measure of goods and services produced in the USA, grew at a 4% annual rate in the fourth quarter of 2003, Commerce said Friday. While that's down from the 8.2% pace of the third quarter and somewhat lower than forecast, economists called it healthy, as it made for a growth rate above 6% in the second half of 2003. "We now have two engines (of growth), not just one. Consumer spending has been throttled back, but business spending is gaining momentum," says Sung Won Sohn, chief economist at Wells Fargo. "I like the composition better." Several economists noted that the pattern of spending is changing. John Silvia, chief economist at Wachovia, notes that businesses invested more than $3 in equipment and software last year for every $1 in structures. Further, information processing was the bulk of equipment spending. Spending on structures fell in the fourth quarter, while equipment and software purchases rose 10%. Businesses have little incentive to build warehouses or factories, given a prolonged slump in manufacturing and a trend toward moving work overseas. "Clearly, it's more equipment and software than anything else, but you've got some solid gains. It's sustainable," Silvia said. One question is when higher spending will translate into hiring. The economy created just 1,000 jobs in December. Richard Yamarone, director of economic research at Argus Research, says in recent weeks he has listened to executives in more than 100 conference calls discuss quarterly earnings reports. Not one discussed a large increase in hiring. "Things are just not jelling in the job market," Yamarone says.   Back to Original Article: Mortgage News You Can Use   Continue with: Job cut announcements jump
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