Home Page GDP growth suggests economy on upswing Associated Press March 26, 2004 WASHINGTON - America's economy ended 2003 on a good note, growing at a solid 4.1 percent 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 consistent with economists' forecasts, equaling an estimate made a month ago, the Commerce Department reported yesterday. GDP measures the value of goods and services produced within the United States 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 percent, 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. "I think we should have another couple of good quarters," said Mark Zandi, chief economist at Economy.com. "The only thing we can be hoping for now is some job growth." On Wall Street, the GDP report helped to lift stocks yesterday. The Dow Jones industrials soared 170.59 points, and the Nasdaq surged 57.69 points. It is the second half of the year, though, that concerns some economists. If the lackluster job climate persists, some worry that consumers might turn cautious, thus raising the risk of an economic slowdown in the final two quarters. The economy added just 21,000 jobs in February - all of them in government - a Labor Department survey of payrolls showed. Job growth has been painfully slow despite better economic activity. Since President Bush took office in January 2001, 2.2 million jobs have been lost. In other economic news, new claims for unemployment benefits rose last week by a seasonally adjusted 1,000 to 339,000, the Labor Department said. The National Association of Realtors reported that sales of previously owned homes grew by 2 percent in February to a seasonally adjusted annual rate of 6.12 million. Low interest rates beckoned buyers and pushed home sales to record levels in 2003. Sales are expected to be brisk this year, too. "With a strong underlying demand for housing from a growing population in a recovering economy, we could be flirting with another record this year," said David Lereah, the association's chief economist. Although the fourth quarter's GDP growth rate was slower than the red-hot 8.2 percent 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 pummeled by the 2001 recession, terror attacks and fallout from a wave of corporate accounting scandals. A notable factor in the pickup in the second half of last year was brisk spending by businesses, which finally cast off some of the caution that had restrained capital investment. Big cutbacks in capital spending had helped to push the economy into recession. Economists said a sustained turnaround in capital spending is crucial for the recovery to last. Businesses boosted spending on equipment and software at a 14.9 percent rate in the fourth quarter. That was a bit more slowly than the 15.1 percent pace estimated a month ago, and it came after a 17.6 percent 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. After-tax corporate profits, adjusted for changes in inventories and capital depreciation, rose by 7.6 percent in the fourth quarter, after a 10.1 percent increase in the prior quarter. Economists hope that continued good profit growth will be an incentive for businesses to step up hiring. Consumer spending rose at a respectable 3.2 percent pace, better than the predicted 2.7 percent pace. It followed a 6.9 percent growth rate in the third quarter. More News: 3-26-04 Consumers More Sanguine, Spending Less 3-26-04 Dividend Tax Changes Cause Headaches for Some Taxpayers 3-26-04 US consumer spending growth decelerates, hit by job fears 3-26-04 Economy, war spur protests 3-26-04 Financial Sector Job Drain Not Over 3-26-04 IRS tells investors feeling robbed doesn't count for deductions 3-26-04 Mortgage rates edge up 3-26-04 Most U.S. companies plan more outsourcing-survey 3-26-04 Tax refunds less than predicted 3-26-04 US consumer confidence improves 3-26-04 U.S. Economy: Personal Spending, Confidence Climb 3-26-04 U.S. EPA may revise vehicle fuel economy tests 3-26-04 U.S. mortgage bonds edge lower in modest trade 3-26-04 U.S. Personal Spending Rise Is Smallest in 4 Months Financial News

 

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