U.S. 4Q growth last year was slowest since 2010

Although the U.S. economy grew at a 0.1% annual rate from October through December—the weakest performance in nearly two years—economists believe a steady housing rebound, stronger hiring, and steady spending by consumers and businesses are pushing economic growth higher in the current quarter. The Commerce Department’s second estimate of fourth-quarter growth was only slightly better than its initial estimate that the economy shrank at a rate of 0.1%. And it was well below the 3.1% growth rate reported for the July-September quarter. Many economists say temporary factors that held back growth in the fourth quarter are probably fading and that growth is likely picking up in the January-March quarter. Paul Ashworth, chief U.S. economist at Capital Economics, predicts growth could be as high as 2% in the current quarter despite higher Social Security taxes, which have reduced take-home pay for most Americans. Alan Levenson, chief economist for T. Rowe Price, predicts growth could be as high as 2.5%. Ashworth noted that a sharp decline in defense spending and slower business restocking subtracted 2.9 percentage points from growth in the fourth quarter. At the same time, consumer spending and business investment—two key drivers of growth—accelerated at the end of last year. “We still believe that the fourth-quarter GDP figures were a lot better than the headline stagnation suggests,” Ashworth says. The Associated Press has the full story here.