Fourth-Quarter U.S. GDP Estimates Boosted on Consumer SpendingVictoria Stilwell
American consumers spent more on health care and other services in the fourth quarter than previously estimated, which will probably give growth an added lift, economists said.
Consumption of medical care and social assistance climbed 4.2 percent from October through December following a 0.3 percent third-quarter gain that was smaller than last reported, according to a report from the Census Bureau in Washington Wednesday.
The increase prompted some economists to boost tracking estimates for gross domestic product as they incorporated the data. The new numbers will probably show households benefited even more from the tailwind of falling fuel prices and rising payrolls at the end of last year.
“There’s a lot of good news for consumers in terms of the decline in oil prices and the job market doing better,” said Daniel Silver, an economist at JPMorgan Chase & Co. in New York.
The figures released Wednesday were not adjusted for inflation or seasonal variations. The Bureau of Economic Analysis will use the results of the Quarterly Services Survey, which is a more comprehensive breakdown of household purchases, to revise GDP data for the fourth quarter.
The increase in health care alone will add as much as 0.2 percentage point to growth, according to calculations by Carl Riccadonna, chief U.S. economist for Bloomberg Intelligence in New York.
Commerce Department figures currently show the U.S. economy grew at a 2.2 percent annualized rate in the three months ended December after a 5 percent jump in the third quarter that was the biggest in 11 years.
Wednesday’s data, together with additional reports to come, will be included in the revised GDP report due March 27.
Consumer spending for the fourth quarter will probably be revised up to show a 4.9 percent gain at an annualized rate, the biggest increase since 2003, from the previously estimated 4.2 percent, according to Silver’s calculations. The update will be paced by more spending on health care and cellular telephone services than previously reported, he said.
“Consumption already looked pretty strong in the fourth quarter in real terms, and now it looks even stronger,” said Silver. The increase in spending also lifted JPMorgan Chase’s fourth-quarter GDP tracking estimate to a 2.5 percent rate from 2.1 percent.
The services report, which was first released in 2004, is available about 75 days after the end of each quarter, according to the Census Bureau. The sample includes about 5,000 services businesses in industries including hospitals, waste management, and administrative support.