- The Washington Times - Friday, February 28, 2003

WASHINGTON, Feb. 28 (UPI) — The Commerce Department said Friday the U.S. economy, as measured by the Gross Domestic Product, expanded twice as fast as originally reported during the final quarter of last year as Corporate America added to their inventories and consumers spent their cash.

The government said the nation's economy expanded at a revised 1.4 annual clip during the fourth quarter after expanding a much faster 4 percent in the third quarter of last year.

The Commerce Department back on Jan. 30 had originally reported the GDP expanded at an 0.7 percent annual pace in the final quarter of last year, which was the slowest pace since the third quarter of 2001.

Most economists on Wall Street were expecting GDP to expand at a 1

percent clip in the final quarter of 2002.

The GDP expanded at a 1.3 percent annual pace during the second quarter of 2002 and expanded 5 percent in the first quarter of last year.

For all of 2002, Gross domestic product, or the total output of goods and services produced in the United States expanded 2.4 percent, after growing a scant 0.3 percent in 2001 and growing at a 3.8 percent annual rate in all of 2000.

The Gross Domestic Product is the broadest measure of aggregate economic activity and encompasses every sector of the economy.

Investors watch the report because it is the consummate measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market doesn't mind growth but is extremely sensitive to whether the economy is growing too quickly and paving the road to inflation.

By tracking economic data like GDP, investors will know what the economic backdrop is for these markets and their portfolios.

Analysts noted the GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components like consumer spending, business and residential investment, and price inflation indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.

The latest report showed real final sales, which exclude inventories, rose 1.2 percent at an annual rate compared with a 3.4 percent increase the previous quarter.

Consumer spending, which accounts for two-thirds of the U.S. economy, rose at a revised 1.5 percent annual pace in the final quarter, faster than the original 1 percent growth and after rising at a 4.2 percent rate in the third quarter.

The report showed the decline in spending from the previous quarter was paced by a 8.5 percent drop in spending on durable goods such as automobiles.

Business fixed investment, which includes spending on commercial construction as well as equipment and software, jumped at a 4.5 percent annual rate in the fourth quarter. That was more than the previously reported 3.1 percent pace of increase and compared with a 0.3 percent rate of decline in the third quarter.

Government spending rose at a 4.9 percent annual pace last quarter, faster than the previously reported 4.6 percent pace and a 2.9 percent rate in the third quarter.

Spending on residential construction jumped 9.4 percent, faster than the previously reported 6.8 percent growth and well above the 1.1 percent pace in the third quarter.

The GDP price deflator, a gauge of inflation tied to the report, rose at a revised 1.6 percent annual rate in the fourth quarter after rising at a 1 percent pace in the third quarter.

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