Fourth-Quarter U.S. Growth Probably Boosted by Stronger Spending

The economy probably expanded at a 3.2 percent annualized rate in the fourth quarter as U.S. consumer spending climbed the most in three years, according to the median forecast of 87 economists surveyed by Bloomberg.

The projected gain in gross domestic product, the value of all goods and services produced, would follow a 4.1 percent advance, completing the strongest six months in almost two years, Household purchases, which account for almost 70 percent of the economy, may have increased 3.7 percent.

The pickup in spending allowed the economy to overcome cutbacks in government outlays caused by the partial federal shutdown in October. Diminishing fiscal challenges and progress in the labor market will probably sustain consumer and corporate demand in 2014, helping explain why the Federal Reserve decided yesterday to keep paring stimulus.

“It was a quarter of pretty solid growth,” said Michael Carey, chief economist for North America at Credit Agricole CIB in New York. “We’ll see less of the headwinds from Washington. That will allow the economy to accelerate this year.”

The Commerce Department will release the GDP figures, the first estimate for the quarter, at 8:30 a.m. in Washington. Economists’ estimates ranged from 0.9 percent to 4.2 percent.

A report from the Labor Department at the same time may show the number of Americans filing applications for jobless benefits rose by 4,000 to 330,000 in the week ended Jan. 25, according to the median projection in the Bloomberg survey.

Government Shutdown

The 16-day federal government shutdown probably shaved 0.5 percentage point from economic growth during the quarter, largely a reflection of fewer hours worked, according to a Jan. 17 report from Morgan Stanley economist Ted Wieseman in New York.

At the same time, a smaller trade gap probably boosted the expansion last quarter. According to the latest available data, the deficit in November shrank to a four-year low as exports jumped to a record and oil imports plunged due to advances in domestic extraction that have put the U.S. on track to be the world’s largest oil producer by 2015.

Among businesses seeing an improvement in demand is Texas Instruments Inc., whose chips are used in almost every electronic device from parts for satellites and rockets to home appliances.

‘Stepping Up’

“The U.S. economy clearly seems to be stepping up,” Kevin March, chief financial officer of the Dallas-based company, said on a Jan. 21 earnings call. “Europe appears to have stopped declining, and it appears that China has stabilized. So you’ve got to feel better about that at this stage, starting 2014, than we did 12 months ago.”

The projected fourth-quarter rate of consumer spending would be the strongest since the final three months of 2010 and follows a 2 percent increase from July through September.

Americans are benefiting from gains in wealth that are also lifting confidence. The S&P/Case-Shiller index of property prices in 20 cities climbed in November from a year earlier by the most since 2006. The Standard & Poor’s 500 Index jumped 30 percent in 2013, its best performance since 1997.

Motor vehicle purchases are a bright spot for demand as Americans take advantage of low borrowing costs to replace older models. While bad weather restrained purchases in December, automakers completed their best sales year since 2007. Plants are stepping up hiring plans as a result.

Ford Hiring

Dearborn, Michigan-based Ford Motor Co., the second-largest U.S. automaker, plans to add 5,000 jobs in the U.S. as it introduces 16 new vehicles in North America this year.

Faster gains in employment will help spur consumer spending this year. Economists surveyed by Bloomberg projected payrolls will rise by about 200,000 workers a month in 2014, compared with 182,000 last year and 183,000 in 2012.

In December, employment increased by 74,000 after a 241,000 jump a month earlier. The jobless rate declined to 6.7 percent, the lowest since October 2008, according to the Labor Department.

“Growth in economic activity picked up in recent quarters,” Fed officials said yesterday in a statement following their first policy meeting of the year. “Labor market indicators were mixed but on balance showed further improvement. The unemployment rate declined but remains elevated.”

The Fed said it will trim its monthly bond buying by $10 billion to $65 billion.

                         Bloomberg Survey

====================================================
1/29/2014             GDP Personal      GDP Core PCE
                   Annual Consump.   Prices   Prices
                     QOQ%     QOQ%     QOQ%     QOQ%
====================================================

Date of Release     01/30    01/30    01/30    01/30
Observation          4Q A     4Q A     4Q A     4Q A
---------------------------------------------------
Median               3.2%     3.7%     1.2%     1.1%
Average              3.1%     3.6%     1.2%     1.2%
High Forecast        4.2%     4.4%     2.0%     1.5%
Low Forecast         0.9%     2.8%     0.5%     1.1%
# of replies           87       28       43       15
Previous             4.1%     2.0%     2.0%     1.4%
---------------------------------------------------
====================================================
1/29/2014             GDP Personal      GDP Core PCE
                   Annual Consump.   Prices   Prices
                     QOQ%     QOQ%     QOQ%     QOQ%
====================================================
4CAST                3.2%     ---      ---      ---
ABN Amro             3.5%     ---      ---      ---
Action Economics     3.5%     ---      0.8%     ---
Ameriprise           3.2%     4.0%     ---      ---
Banca Aletti         3.1%     4.4%     0.8%     1.2%
Bank of the West     2.9%     3.6%     1.2%     ---
Banorte-IXE          2.9%     3.9%     ---      ---
Bantleon Bank AG     3.3%     ---      ---      ---
Barclays             3.5%     3.8%     1.2%     ---
Bayerische LB        3.0%     2.8%     ---      ---
BBVA                 2.8%     3.3%     1.3%     1.2%
Berliner Sparkasse   2.3%     ---      ---      ---
BMO Capital Markets  3.4%     ---      1.5%     ---
BNP Paribas          3.0%     ---      1.5%     ---
BofA Merrill Lynch   3.8%     ---      1.1%     1.1%
Capital Economics    3.5%     ---      ---      ---
====================================================
1/29/2014             GDP Personal      GDP Core PCE
                   Annual Consump.   Prices   Prices
                     QOQ%     QOQ%     QOQ%     QOQ%
====================================================
CIBC World Markets   2.9%     ---      1.2%     ---
Citi                 3.5%     3.7%     1.8%     ---
ClearView Economics  3.3%     ---      1.2%     1.5%
Comerica             2.4%     ---      1.0%     ---
Commerzbank AG       3.2%     ---      ---      ---
Credit Agricole      3.6%     3.8%     1.2%     ---
Credit Suisse        3.3%     ---      1.8%     ---
Daiwa Securities     3.5%     ---      2.0%     ---
Danske Bank          3.5%     4.0%     ---      ---
DekaBank             3.6%     ---      ---      ---
Desjardins Group     2.6%     ---      ---      ---
Deutsche Bank        4.0%     ---      1.3%     ---
Dubuque Bank & Trust 3.0%     ---      ---      ---
DZ Bank              2.0%     ---      1.0%     ---
First Trust          3.0%     3.7%     1.5%     ---
FTN Financial        3.0%     ---      ---      ---
====================================================
1/29/2014             GDP Personal      GDP Core PCE
                   Annual Consump.   Prices   Prices
                     QOQ%     QOQ%     QOQ%     QOQ%
====================================================
Goldman, Sachs       3.2%     3.9%     ---      ---
Haitong Intl         2.7%     3.3%     1.1%     ---
Helaba               3.4%     ---      ---      ---
High Frequency       3.3%     ---      1.4%     1.1%
HSBC Markets         2.9%     3.4%     ---      ---
Hugh Johnson         3.5%     ---      1.0%     ---
IDEAglobal           2.8%     3.0%     1.2%     1.4%
IHS Global           3.5%     ---      ---      ---
Informa              3.0%     ---      1.0%     ---
ING                  2.9%     ---      ---      ---
Intesa Sanpaolo      3.3%     ---      ---      ---
J.P. Morgan Chase    3.1%     3.7%     1.3%     1.1%
Janney Montgomery    2.5%     3.1%     1.0%     ---
Jefferies            3.0%     ---      1.5%     ---
John Hancock         3.8%     3.2%     ---      ---
Landesbank BW        3.8%     ---      ---      ---
====================================================
1/29/2014             GDP Personal      GDP Core PCE
                   Annual Consump.   Prices   Prices
                     QOQ%     QOQ%     QOQ%     QOQ%
====================================================
Lloyds               3.4%     4.0%     1.0%     ---
Maria Fiorini        3.5%     ---      1.3%     ---
Market Securities    3.3%     ---      ---      ---
MET Capital Advisors 3.1%     ---      ---      ---
Mizuho Securities    2.5%     ---      ---      ---
Moody’s Analytics    3.0%     ---      ---      ---
Morgan Stanley       3.7%     3.8%     ---      ---
National Bank Finl   3.5%     ---      ---      ---
Nationwide           3.9%     ---      ---      ---
Natixis              3.0%     3.2%     0.5%     ---
Nomura               3.4%     ---      ---      ---
Nord/LB              2.5%     ---      ---      ---
OSK-DMG              3.1%     3.8%     1.5%     1.1%
Oxford Economics     3.6%     ---      1.1%     1.4%
Pantheon             3.6%     3.6%     1.0%     ---
Pierpont Securities  2.4%     ---      ---      ---
====================================================
1/29/2014             GDP Personal      GDP Core PCE
                   Annual Consump.   Prices   Prices
                     QOQ%     QOQ%     QOQ%     QOQ%
====================================================
PineBridge           3.3%     ---      ---      ---
PNC Bank             3.0%     ---      0.9%     ---
Prestige Economics   2.8%     ---      ---      ---
Raiffeisenbank       2.5%     ---      0.7%     1.1%
Raymond James        3.2%     ---      ---      ---
RBC Capital Markets  2.8%     4.0%     ---      ---
RBS Securities       2.5%     ---      1.7%     1.2%
Regions Financial    3.4%     ---      1.2%     ---
Scotiabank           3.0%     ---      ---      ---
SMBC Nikko           2.8%     ---      1.1%     ---
Societe Generale     4.2%     3.7%     1.8%     1.1%
Southern Polytech St 0.9%     ---      ---      ---
Standard Chartered   3.0%     3.6%     1.2%     1.1%
Sterne Agee          1.9%     ---      ---      ---
Stone McCarthy       3.9%     ---      0.9%     ---
TD Securities        3.0%     3.8%     1.1%     1.1%
====================================================
1/29/2014             GDP Personal      GDP Core PCE
                   Annual Consump.   Prices   Prices
                     QOQ%     QOQ%     QOQ%     QOQ%
====================================================
UBS                  3.6%     3.9%     1.1%     1.1%
UniCredit Research   2.8%     ---      ---      ---
Union Investment     2.9%     ---      ---      ---
University of MD     3.2%     ---      1.1%     ---
Wells Fargo & Co     3.5%     ---      ---      ---
Westpac Banking      2.2%     ---      ---      ---
Wrightson ICAP       3.7%     ---      ---      ---
====================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Carlos Torres at ctorres2@bloomberg.net

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