U.S. economy ends '03 on strong note
JEANNINE AVERSA
ASSOCIATED PRESSWASHINGTON — The U.S. economy recovery ended 2003 on a good note, growing at a solid 4.1 per cent annual rate — and is expected to do even better in the opening quarter of this year.
The latest reading on gross domestic product for the October-to-December quarter was the same as a previous estimate made a month ago, the Commerce Department reported today. That was consistent with economists' forecasts.
GDP measures that value of all goods and services produced within a country and is considered the most important barometer of the economy's health.
Economic growth in the current January-to-March quarter is expected to clock in at a rate of 4.5 per cent, according to some analysts' forecasts. Growth in the April-to-June quarter also should be around that pace, they said.
Tax refunds and other tax incentives should motivate consumers and businesses to spend and invest more — energizing the economy in the first half of this year, economists said.
It's the second half of the year, though, that some economists are a bit concerned about.
If the lacklustre job climate persists, some worry that consumers might turn cautious, thus raising the risk of an economic slowdown in the final two quarters of this year.
The economy added just 21,000 jobs in February — all of them in government — a Department of Labor survey of payrolls showed. Job growth has been painfully slow despite better economic activity.
Since President George W. Bush took office in January 2001, the economy has lost 2.2 million jobs.
Presumptive Democratic presidential nominee John Kerry has pointed to this as evidence that Bush's economic policies aren't working. Bush, who has defended his policies, wants Congress to make his tax cuts permanent, contending that this will make the economy stronger and spur job growth.
Although the fourth quarter's growth rate was slower than the red-hot 8.2 per cent pace of the third quarter, the economy's performance in the second half of 2003 marked the fastest back-to-back quarterly increases since the first two quarters of 1984.
Until the second half of last year, the economy was struggling mightily to get back on firm footing after being knocked asunder by the 2001 recession, terror attacks and fallout from a wave of corporate accounting scandals.
A noteworthy factor in the pickup in the second half of last year was brisk spending by businesses. Businesses finally cast off some of the caution that had previously restrained capital investment.
It was big cuts in capital spending that helped to thrust the economy into recession. Economists said a sustained turnaround in capital spending is a crucial ingredient for the recovery to be lasting.
Businesses boosted spending on equipment and software at a 14.9 per cent rate in the fourth quarter. That was a tad slower than the 15.1 per cent pace estimated a month ago and came after a 17.6 per cent growth rate in the third quarter.
Still, businesses cut spending on new plants and buildings in both the third and fourth quarters. That's been an area that has remained weak.
Consumers, whose spending accounts for roughly two-thirds of all economic activity, also helped the economy. Consumer spending rose at a respectable 3.2 per cent pace in the fourth quarter. That was better than the last estimate of a 2.7 per cent pace and followed a 6.9 per cent growth rate in the third quarter.
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