Economy Grows at 3.2% Pace in Fourth Quarter

10:37 AM, Jan 30, 2014   |    comments
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Tim Mullaney, USA TODAY

The U.S. economy grew at a 3.2% annual clip in the fourth quarter, powered by a strong gain in consumer spending.

That represents a slowdown from the third quarter's growth rate of 4.1%, the Commerce Department said Thursday.

Even so, the last six months of 2013 were the best stretch of economic activity since October, 2011-March 2012.

"The U.S. economy appears to be hitting its stride," said PNC Financial economist Stuart Hoffman. "Consumers are slowly but steadily increasing their spending thanks to moderate job and income growth and gains in stock and home prices."

Hoffman forecasts GDP growth of about 3% in 2014 compared with 1.9% in 2013 and 2.8% in 2012.

Consumer spending, which accounts for two-thirds of the economy, grew at an annual pace of 3.3%. That's the most in three years.

Businesses raised overall spending at a 3.8% pace but at a 6.9% rate for equipment. In the third quarter, business spending grew at a 4.8% rate.

The country also got a boost from its shrinking trade deficit, as rising exports added 1.48 percentage points to growth. Exports were up at an 11.4% annual rate from the third quarter.

The fourth quarter saw one last big negative hit from the Washington budget fights, which led to the 16-day partial government shutdown in October. Federal government spending fell 12.6%, led by a 14% drop in defense spending, the Commerce Department said. The shutdown contributed to a drop in federal spending that shaved 0.93 percentage points from growth.

The report came the day after the Federal Reserve cited a strengthening economy in announcing it will further reduce the massive bond purchases the central bank has used to hold down long-term interest rates.

The report is the first of three estimates the government will make of fourth-quarter growth. The data will be revised to include late-arriving information about the different indicators statisticians track to calculate the path of the overall economy.

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