Posted on 03/30/2005 4:53:00 PM PST by BenLurkin
WASHINGTON (AP) -- The economy closed out 2004 with decent momentum and appears to have picked up some speed since then, raising hopes of a better climate for jobs. With the economy chugging ahead -- but not too rapidly -- Wall Street staged a jubilant rally.
The broadest barometer of economic health, the gross domestic product, advanced at an annual rate of 3.8 percent over the final three months of last year, the Commerce Department reported Wednesday.
The rate, the same as the one estimated a month ago, improved upon the initial reading of 3.1 percent pace for the fourth quarter. GDP measures the value of all goods and services produced in the United States.
"The economy at the moment has a pretty good tail wind," said Anthony Chan, senior economist at JP Morgan Asset Management.
Economists said the economic performance from October through December was admirable, even when compared with the 4 percent growth rate in the third quarter. That was a pace some analysts had hoped would continue over the last three months of 2004.
On Wall Street, the lower-than-forecast fourth quarter GDP showing helped to calm investors' fears that the economy may be growing too fast. The Dow Jones industrials surged 135.23 points to close at 10,540.93. It marked the Dow's biggest one-day point gain of the year.
Looking at the January-to-March period, the economy is expected to grow at a rate of about 4 percent or slightly above, according to some analysts' projections. Economic growth probably will slow over the next three months, but will still be healthy, they said.
If that outlook prevails, it should help generate respectable job gains, analysts said. "We are going to produce better growth on the job front," predicted Ken Mayland, president of ClearView Economics.
The overall economy has performed better than the jobs market, where progress has proved uneven.
The economy added a net 262,000 jobs in February, the most since October. With the government releasing the March employment report Friday, analysts are forecasting a gain of about 220,000 jobs for the month.
President Bush wants to see the economy on firm footing as he tries to sell the public on his vision of overhauling Social Security. He is promoting the idea of letting workers set up individual investment accounts in stocks and bonds, using a big chunk of payroll taxes to do that.
Federal Reserve policy-makers are feeling upbeat about the economy's growth, yet are concerned about a potential pickup in inflation. Last week, for the seventh time since June, they again raised interest rates. An additional increase to hold inflation in check is expected at the Fed's next meeting, on May 3.
An inflation gauge tied to the GDP report and closely monitored by the Fed showed that prices -- excluding food and energy -- rose at a rate of 1.7 percent in the final quarter of 2004. That heightened inflation jitters because the increase was slightly higher than a previous estimate for the October through December period. Also, it was nearly double the 0.9 percent rise in the third quarter.
The Fed said at its meeting last week that inflationary pressures "have picked up in recent months and pricing power is more evident," meaning some companies are finding it easier to raise prices.
The Fed also said the economy is growing solidly despite the rise in energy prices. Oil prices, which recently set records, have eased somewhat.
Still, some economists believe that high energy prices and the series of interest rate increases will result in slower economic activity over the second half of 2005. Some projections for growth for July through December range from an average of just over 3 percent to about 3.7 percent.
Higher prices did not stop consumers and businesses from spending in the final three months of last year.
Consumer spending grew at a 4.2 percent rate. That was on top of a brisk 5.1 percent growth rate in the third quarter.
Business spending on equipment and software increased at a robust 18.4 percent pace in the fourth quarter, compared with a 17.5 percent pace in the third quarter.
One measure of after-tax profits in the GDP report showed profits rebounding in the final quarter of 2004. They grew by 12.5 percent, compared with a decline of 4.2 percent in the third quarter. Higher profits should help cushion companies from the high prices for energy and some raw materials, analysts said.
Consumer spending grew at a 4.2 percent rate. That was on top of a brisk 5.1 percent growth rate in the third quarter.
Business spending on equipment and software increased at a robust 18.4 percent pace in the fourth quarter, compared with a 17.5 percent pace in the third quarter.
One measure of after-tax profits in the GDP report showed profits rebounding in the final quarter of 2004. They grew by 12.5 percent, compared with a decline of 4.2 percent in the third quarter. Higher profits should help cushion companies from the high prices for energy and some raw materials, analysts said.
What happened to the "soup lines" that Dingy Harry referred to? (I think that was him)
When the AP can't hide even "hide" it, you know things are going quite well.
BTTT
Yup!
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