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Economy grew at a faster pace at end of 2011
Question of the Day
Some trends likely to slow growth in the current quarter are still good for consumers. The warm winter weather likely will mean Americans won’t have to spend as much to heat their homes, but that technically will lower the economy’s growth rate.
The economy was held back in the fourth quarter by a big drop in government defense spending. Defense spending is unlikely to be much of a factor in the current quarter, economists say.
Growth could be slowed or even derailed this year by rising gas prices, which have jumped 30 cents in the past month. That increase forces consumers to spend more for the same amount of gas and leaves less money for other purchases. A sharp rise in gas prices early last year choked off growth after companies began the year with a burst of hiring.
But so far, the increase isn’t enough to cause a repeat of last year’s disappointment, economists say. With hiring accelerating and incomes higher, consumers are better able to afford higher prices at the pump.
And the prices of other goods also jumped last year, particularly food, as well as other energy sources such as natural gas. But natural gas costs have plummeted recently while food prices are rising at a much slower pace. Those trends should offset some of the squeeze on spending from pricier gas.
The government makes three estimates of the gross domestic product for each quarter. The GDP is the economy’s total output of goods and services and includes everything from autos to utility output to haircuts. Each revision is based on more complete economic data.
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