WASHINGTON – The economy grew at a 1.4 percent rate in the final quarter of last year -- twice as fast as the government first estimated. While the performance is still considered below par, it showed that the recovery didn't stumble as badly as previously thought.
The revised reading on gross domestic product, reported by the Commerce Department Friday, is based on more complete data and marked a stronger showing than the miserable 0.7 percent growth rate that was reported for the fourth quarter of 2002 month ago.
GDP measures the total value of goods and services produced within the United States and is considered the best barometer of the economy's health.
The major factors in the upward revision to fourth quarter GDP were stronger investment by businesses in building up stockpiles of unsold goods and a slight boost to consumer spending, the main force keeping the economy going.
Even though the new fourth-quarter estimate was slightly better than the 1 percent growth rate economists were forecasting, it still represented a big slowdown from the third quarter, when the economy grew at a brisk 4 percent pace.
The economy has been coping with uneven growth as a quarter of strength has been followed by three months of weakness.
Worries about a possible war with Iraq, the rollercoaster stock market and a lackluster job market are weighing heavily on the economy, economists say.
The biggest factor holding back the economy's recovery is the reluctance of businesses to make big commitments in hiring and in capital spending, due in part to uneasiness about war and generally to an uncertain business environment.
President Bush -- not wanting the economy's woes to linger into his 2004 reelection campaign -- has proposed a 10-year, $1.3 trillion tax-cut package to help energize the economy.
But Federal Reserve Chairman Alan Greenspan says the package isn't needed now. He is hopeful that when "geopolitical" uncertainties lift, businesses will be much more willing to step up capital investment and hiring, which would boost economic growth.
Economists believe the economy is picking up momentum in the current quarter, expanding at a rate of 2.5 percent or more.
In the fourth quarter, stronger inventory building by businesses resulted in a 0.24 percentage point boost to GDP, a turnaround from the 0.56 percentage point reduction to GDP estimated a month ago.
Consumer spending, which accounts for two-thirds of all economic activity in the United States, increased at a rate of 1.5 percent in the fourth quarter.
That marked a slight improvement over the 1 percent pace previously reported, but still was a big pullback from the robust 4.2 percent rate in the third quarter.
In some encouraging news, businesses -- after cutting capital investment for eight straight quarters, boosted such spending at a rate of 2.5 percent in the fourth quarter, better than the 1.5 percent growth rate previously reported. The new estimate marked the best showing since the third quarter of 2000.
All of the strength, however, came from investment in new equipment and software. Companies continued to cut investment in new plants and other buildings.
The housing market -- one of the bright spots of the economy -- continued to help spur growth. Spending on residential projects grew at a 9.4 percent rate in the fourth quarter, stronger than the 6.8 percent pace previously reported.