Growth revision shows underlying strength
The revision to fourth-quarter growth suggested the economy had momentum as 2013 ended and should regain strength once the effects of unseasonably cold weather that dampened activity at the beginning of this year start to abate.
Growth in the first quarter is expected to have slowed to a pace of around 2 percent.
Output has also been dampened by the expiration of long-term unemployment benefits, cuts to food stamps and businesses placing fewer orders with manufacturers as they work through a pile of unsold goods in their warehouses.
Consumer spending grew at a brisk 3.3 percent rate, reflecting strong growth in services. That reflected increased spending on health care and utilities. Spending on long-lasting manufactured goods was also revised higher.
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Consumer spending was previously reported to have increased at a 2.6 percent rate. The pace in the fourth quarter was the quickest in three years and contributed more than two percentage points to GDP growth.
Inventories, previously reported to have risen by $117.4 billion in the fourth quarter, were revised down to $111.7 billion. The downward revision, which is positive for near-term economic growth, resulted in inventories not contributing to growth in the quarter.
With fewer stocks on their shelves or in their warehouses, businesses now are more likely to need to place new orders or otherwise ramp up production to meet demand.
Business spending on equipment was revised up, but outlays on non-residential structures were lowered. Spending on home building and government outlays was not as weak as previously estimated.