Ahead of the Bell: US economy-GDP

US economy expected to keep slowing through first quarter, reflecting harsh winter

Associated Press
US economic growth for 4Q is revised higher
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FILE - In this Dec. 5, 2013 file photo a dish is prepped at the Fig & Olive restaurant, near New York's Rockefeller Center, in New York. The Commerce Department releases fourth-quarter gross domestic product on Thursday, March, 27, 2014. (AP Photo/Richard Drew, File)

WASHINGTON (AP) -- The Commerce Department issues its third and final estimate of how fast the U.S. economy grew in the October-December quarter. The report will be released at 8:30 a.m. EDT Thursday.

GDP GROWTH: The forecast is that the overall economy, as measured by the gross domestic product, grew at an annual rate of 2.7 percent in the fourth quarter, according to a survey of economists by data firm FactSet.

WINTER SLOWDOWN: That would be slightly faster than the government's estimate one month ago that the economy grew at a 2.4 percent rate in the fourth quarter. But it would still be below the 4.1 percent rate of growth in the July-September period.

Economists believe growth has slowed even more in the current January-March quarter. Many are estimating that growth slowed to a rate of 2 percent or less this quarter, reflecting in part the harsh winter, which has forced temporary shutdowns at some factories and kept consumers away from the stores.

SPRING REBOUND: But as temperatures warm, most economists think growth will rebound, with some projecting the economy will expand this year by 3 percent. If that forecast proves accurate, it would make growth this year the strongest since 2005, two years before the nation plunged into worst recession since the 1930s.

Since the recession ended in June 2009, the economy has struggled to gain momentum and the weak growth has made it harder for people who lost jobs during the downturn to find work.

The new report is the third and final look at the fourth quarter performance of the gross domestic product, the economy's total output of goods and services.

For all of 2013, the economy grew at a lackluster 1.9 percent after growth of 2.8 percent in 2012. Growth was held back last year by higher federal taxes and government spending cuts enacted to combat soaring budget deficits. Economists estimate that the squeeze from the government subtracted about 1.5 percentage points from growth.

If growth does reach 3 percent this year, it would be the strongest performance since 2005 when the economy expanded 3.4 percent.

Federal Reserve Chair Janet Yellen said after a Fed meeting last week that the central bank still expects the economy to strengthen this year, which would help put more people to work.

At that meeting, the Fed decided to reduce its monthly bond purchases by another $10 billion, the third such reduction since December. That puts the bond purchases, which are intended to keep long-term loan rates low to encourage spending and growth, at $55 billion.

Many economists think that as long as the economy keeps improving, the Fed will keep cutting the bond purchases by $10 billion at each meeting this year until ending the program entirely in December.

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