By Timothy R. Homan
Jan. 24 (Bloomberg) -- The U.S. economy probably grew in the closing months of 2009 at the fastest pace in almost four years as factories stepped up production and companies purchased new equipment, economists said before reports this week.
Gross domestic product expanded at a 4.6 percent pace from October through December, more than double the prior quarter’s growth rate and the strongest since the first three months of 2006, according to the median estimate of 74 economists surveyed by Bloomberg News. Other reports may show orders for durable goods increased and home sales declined.
Manufacturers such as Intel Corp. are leading the recovery as growing demand and dwindling inventories prompt companies to speed up assembly lines. Slower consumer spending after the third-quarter’s “cash for clunkers” rebound is a reminder that 10 percent unemployment is causing Americans to hold back, one reason why the Federal Reserve may keep interest rates low.
“Inventories are going to be responsible for at least half of the growth, if not more,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “There’s been an enormous amount of government stimulus that will be fading as we go through the year, so it’s unclear how much the economy can do on its own.”
Fed policy makers will do their part to spur growth by keeping borrowing costs near zero after their two-day meeting this week, economists forecast in a Bloomberg survey. Central bankers, who meet Jan. 26-27, may reiterate their pledge to keep rates “exceptionally low” for “an extended period.”
Fed Forecast
The target rate for overnight lending among banks will stay in a range from zero to 0.25 percent through September before going up by half a point in the fourth quarter, according to the median forecast of economists surveyed earlier this month.
The Commerce Department’s first estimate of fourth-quarter GDP is due Jan. 29. The world’s largest economy grew at a 2.2 percent pace from July through September, the first gain in more than a year, after shrinking 3.8 percent in the 12 months to June. That marked the worst recession since the 1930s.
Stocks rallied last year on mounting signs the economic slump was ending. The Standard & Poor’s 500 Index climbed 65 percent in 2009 after reaching a 12-year low on March 9.
Additional gains in the first part of this month evaporated last week after President Barack Obama proposed limiting risk- taking at banks and as concern grew that China will have to do more to cool its economy.
Chip Demand
Intel, the world’s largest chipmaker, posted its biggest quarterly revenue in more than a year last quarter, a sign the computer industry has emerged from last year’s global recession.
“My expectation for 2010 is that we’re going to see robust unit growth,” Chief Financial Officer Stacy Smith said in an interview this month. “The consumer segments of the market will stay pretty strong, and I do believe we’re going to see a resurgence in PC client sales.”
Smaller declines in inventories contributed to growth for a second consecutive quarter as companies picked up the pace of orders, economists said. Stockpiles rose 0.4 percent in November, marking the first back-to-back increase in more than a year.
Consumer spending, which accounts for about 70 percent of the economy, probably increased at a 1.8 percent annual rate after rising at a 2.8 percent pace in the previous three months, the GDP report is also projected to show.
Third-quarter purchases received a boost from the government’s auto-incentive program that offered buyers discounts to trade in older cars and trucks for new, more fuel- efficient vehicles. The plan expired in August.
Business Investment
Orders for long-lasting goods probably rose 2 percent in December, economists project the Commerce Department will report Jan. 28. While companies are buying new equipment, they’re reluctant to hire workers.
Payrolls fell by 85,000 last month after a 4,000 gain in November that was the first increase in almost two years. The U.S. has lost 7.2 million since the start of the recession in December 2007, the most of any slowdown in the post-World War II era.
The jobless rate held at 10 percent in December, the Labor Department said on Jan. 8. A jump in the number of discouraged workers leaving the labor market kept the rate from rising.
Property values are showing signs of stabilizing. A report from S&P/Case-Shiller, due Jan. 26, may show home prices in 20 U.S. metropolitan areas declined 5 percent in the year ended in November, the smallest drop since September 2007, according to the survey median.
Existing home sales dropped 9.8 percent in December, the month after a government tax credit was originally due to expire, the survey showed ahead of a Jan. 25 report from the National Association of Realtors. Purchases decreased to a 5.9 million pace from 6.54 million the prior month.
New-home sales last month rose 4.2 percent to an annual pace of 370,000, according to the survey median before a Commerce Department report on Jan. 27.
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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Exist Homes Mlns 1/25 Dec. 6.54 5.90
Exist Homes MOM% 1/25 Dec. 7.4% -9.8%
Case Shiller Monthly MO 1/26 Nov. 0.4% 0.3%
Case Shiller Monthly YO 1/26 Nov. -7.3% -5.0%
Case Shiller Monthly In 1/26 Nov. 146.6 146.8
Consumer Conf Index 1/26 Jan. 52.9 53.5
New Home Sales ,000’s 1/27 Dec. 355 370
New Home Sales MOM% 1/27 Dec. -11.3% 4.2%
Initial Claims ,000’s 1/28 16-Jan 482 450
Cont. Claims ,000’s 1/28 9-Jan 4599 4600
Durables Orders MOM% 1/28 Dec. -0.7% 2.0%
Durables Ex-Trans MOM% 1/28 Dec. 1.5% 0.5%
GDP Annual QOQ% 1/29 3Q A 2.2% 4.6%
Personal Consump. QOQ% 1/29 3Q A 2.8% 1.8%
GDP Prices QOQ% 1/29 3Q A 0.4% 1.3%
Core PCE Prices QOQ% 1/29 3Q A 1.2% 1.3%
Employ Costs QOQ% 1/29 4Q 0.4% 0.4%
Chicago PM Index 1/29 Jan. 58.7 57.4
U of Mich Conf. Index 1/29 Jan. F 72.8 73.0
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To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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