Washington, Feb. 28 (Bloomberg) -- The U.S. economy grew in the fourth quarter at the slowest pace since it contracted more than a year earlier, economists said they expect the government's revised statistics to show today. Gross domestic product, the value of all goods and services produced in the U.S., probably expanded at a 1 percent annual rate in the final three months last year, a survey found. Growth was initially estimated last month at a 0.7 percent pace. The figure is being revised because companies added more to inventories than initially estimated, economists said. ``You shouldn't be expecting a coiled-spring economic recovery,'' said Steven Wieting, an economist at Salomon Smith Barney Inc. in New York. ``It's more of a choppy pattern of growth.'' The economy has proceeded in fits and starts since late 2001, when economists say the recession probably ended. It may be slow to accelerate as the threat of war in Iraq delays business spending and hiring decisions. Housing starts, industrial production and retail sales excluding autos surged in January, suggesting a pickup in growth this quarter.
The Commerce Department is to issue the revised GDP report at 8:30 a.m. Washington time. The estimated size of the revision is based on the median of 65 forecasts in a Bloomberg survey. Also today, the University of Michigan will probably report that its index of consumer sentiment declined in February amid concerns about war, terrorism and the economy, economists said. The university's final index for February probably fell to 79.1 from a preliminary reading of 79.2 and from January's 82.4, based on the median of economists' forecasts. That would be the lowest reading since 77.9 in September 1993. The report is set for 9:50 a.m. Washington time. In addition, the Chicago purchasing managers regional manufacturing index probably fell to 52.5 in February from 56 in January, a survey of economists found. A reading above 50 indicates growth. That report is set for 10 a.m. Washington time.
GDP Revision
In estimating fourth-quarter GDP last month, the government assumed inventories fell in December. Business stockpiles instead rose 0.6 percent, making the revision to economic growth necessary. At the same time, the trade deficit widened to a record $44.2 billion in December, worse than the government had estimated, which may limit the effect of higher inventories. The latest Blue Chip Economic Indicators survey projects growth of 2.6 percent in the 2003 first quarter and 3.2 percent in the second quarter. The survey of more than 50 business economists found that growth will probably quicken to a 3.8 percent pace by yearend as consumer spending holds up and business investment rises. Economists say forecasts may change because it is unclear how a war in Iraq would affect the economy. Some say that a war will begin within the next one to two months and that a quick resolution would lead to a decline in oil prices. The price of crude oil on the New York Mercantile Exchange is close to a 29- month high. ``Forecasts are about as good as the Iraq outcome,'' said Wieting, who predicts that the economy will grow 2.7 percent this year, up from 2.4 percent last year. ``It's not the only issue for the economy or the most important issue, but it is very meaningful right now.''
Lower Forecasts
Some economists are revising lower their estimates for growth. Richard Berner, chief U.S. economist at Morgan Stanley & Co. in New York, this week lowered his forecast for 2003 expansion to 2.1 percent from 2.5 percent two weeks earlier, saying that ``surging energy prices and wartime uncertainty are taxing growth.'' He projects GDP will rise ``at stall speed'' of close to 1 percent for the first half of the year. Colder-than-usual temperatures this winter and a reduction in Venezuela oil supplies because of a strike are also pushing up energy prices. The Commerce Department report will also include an initial estimate of fourth-quarter corporate profits. Unit labor costs jumped 4.8 percent in the fourth quarter, the most since the 2002 third quarter, which may have limited gains in earnings. ``Lots of companies beat earnings estimates, but the level of improvement was a lot lower than I had initially expected,'' Wieting said. Inflation probably remained subdued, the report is expected to show. The GDP price deflator, a gauge of inflation tied to the report, probably grew at a 1.8 percent annual rate from October- December, the fourth straight quarter below 2 percent on an annual basis.//www.quote.bloomberg.com