(Gene J. Puskar / Associated…)
WASHINGTON -- The picture of the American economy has improved -- looking forward and backward.
Economic output in last year's fourth quarter was revised slightly higher, putting the nation's growth rate for all of 2012 at a modest 2.2%.
The Commerce Department said Thursday that U.S. gross domestic product, or total goods and services produced, expanded at an annual rate of 0.4% in the fourth quarter, after adjusting for inflation. That is down from 3.1% in the third quarter, but better than the 0.1% real GDP growth in the government's previous estimate of fourth-quarter activity.
The weakness in the fourth quarter output was exaggerated by an unusually big drop in federal defense spending and a sharp reduction in inventory accumulation. Real personal spending actually picked up a bit in the fourth quarter, and housing and nonresidential investments both saw strong gains.
Corporate profits grew by a healthy 2.3% in the fourth quarter from the previous quarter. And consumers' after-tax incomes surged at year's end along with dividend and bonus payments, ahead of expected tax increases, the Commerce data show.
Since the recovery officially began in mid-2009, the underlying growth rate of the economy has been a little above 2%, considered by many economists as sluggish given the deep recession.
But this year's opening quarter is looking much better.
Despite the fiscal head winds of higher payroll taxes and government spending cuts, the U.S. economy is set to grow 3.5% in the first quarter, according to a new forecast Thursday by the Organization for Economic Cooperation and Development, a group of mainly advanced economies.
The OECD cited the Federal Reserve's stimulus policy, saying that "monetary easing appears to be feeding through to the real economy as household consumption has picked up and the housing sector has begun to rebound."
Many private economists are not quite that bullish, uncertain about the effects of higher taxes on consumer spending, which accounts for 70% of American economic activity.
The latest OECD forecast sees U.S. GDP growth in the second quarter slipping back to 2% as fiscal spending cuts weigh on the economy.
Still, the near-term outlook for the U.S., as well as some other major economies, has brightened in recent weeks.
The OECD predicted that Japan's economy, the world's third largest, would expand 3.2% in the first quarter, thanks to fiscal and monetary stimulus. Germany, the fourth-biggest economy, is expected to rebound as well, with its GDP advancing 2.3% in the first quarter, even as several other major Eurozone countries remain stuck in the mud.
China, the world's second-largest economy behind the U.S., is likely to grow well above 8% in the first half of this year, the OECD said.
Fed holds steady — for now
Economy improving faster than expected
U.S. home prices post sharp increases in January