Jan. 30 (Bloomberg) -- The U.S. economy may have expanded at a 5 percent annual rate from October through December as businesses boosted production to replenish inventories and invested more in new equipment, according to a survey of economists in advance of today's Commerce Department report. Such a rise in gross domestic product, the value of all goods and services produced, would follow an 8.2 percent annual pace in the third quarter -- the strongest in two decades. The forecast is based on the median estimate of 69 economists in a Bloomberg News survey. The 6.6 percent average pace of growth in the second half of 2003 would be the strongest since the first six months of 1984.
Texas Instruments Inc. and Xilinx Inc. are among manufacturers accelerating assembly lines to replace depleted stocks after demand surged. Economic growth is broadening as corporate investment rises, housing construction surges and exports rise, suggesting the world's largest economy is becoming less dependent on consumer spending as its sole driver. The report is set for 8:30 a.m. in Washington. ``The economy advanced at a solid and more sustainable pace last quarter,'' said Peter Kretzmer, a senior economist at Banc of America Securities LLC in New York. ``As businesses gained confidence in sustained economic growth, production ran ahead of growth in demand last quarter, adding significantly to inventories.'' The University of Michigan may report that its final January consumer sentiment index registered 103.0, down from the initial 103.2 and higher than December's 92.6, according to the median of forecasts. The Michigan report is set for 9:50 a.m. Washington time.
The Chicago purchasing managers regional manufacturing index, set for release at 10 a.m. Washington time, may increase to 62 this month from 61.2 in December, according to the median forecast. Readings above 50 signal growth in manufacturing.
Business Inventories
Inventories at U.S. businesses rose for a third straight month in November as wholesalers and retailers tried to keep more goods on hand, according to Commerce Department figures. Manufacturers of goods made to last at least three years, such as computers and automobiles, boosted stockpiles in two of three months last quarter, ending nine straight months of declines. Xilinx, the world's biggest maker of programmable semiconductors, is building inventory after supplies of its chips got ``too lean,'' Chief Financial Officer Kris Chellam said last week in a televised interview with Bloomberg News. Demand for semiconductors used in communications equipment, DVD players and mobile phones may lead to a sales increase this quarter of as much as 32 percent for the San Jose, California-based company, Chellam said.
Demand Increases
``Overall, markets are lifting,'' said Ron Slaymaker, vice president of Texas Instruments in a televised interview with Bloomberg News Tuesday. ``It was very broad-based in terms of the strength that we saw in the fourth quarter. We're now entering into that part of the cycle where capacity is tightening pretty much across the board, and we're starting to see demand exceed supply.'' Texas Instruments, the world's biggest maker of semiconductors that power mobile phones, said this week it had a fourth-quarter profit of $512 million as sales reached a three- year high. The boost in inventories is expected to add almost a percentage point to GDP in the fourth quarter, according to a forecast from economists at Lehman Brothers Inc. in New York. Reductions in stockpiles subtracted from economic growth for the last four quarters.
Equipment Spending
The Institute for Supply Management's factory index rose in December to the highest reading since 1983 as manufacturers boosted production in response to rising orders. Businesses are also spending more on new equipment to help step up production. Sales of non-defense capital goods excluding purchases of aircraft, a proxy for current business investment, rose at an 8.3 percent annual rate during the fourth quarter, building on a 15.6 percent surge in the previous three months, figures from the Commerce Department showed Wednesday. ``Clearly, spending is picking up,'' said Gary Bloom, chief executive of Veritas Software Corp., the largest independent maker of data-storage programs, in a televised interview with Bloomberg News from Davos, Switzerland, last week. ``We are going into the year pretty optimistic.'' Housing also contributed to growth last quarter. Builders broke ground on more homes in December than at any time since February 1984, according to a report from the Commerce Department last week. Investment in residential construction probably rose 11 percent at an annual rate last quarter following a 21.9 percent gain in the previous three months, according to the Lehman Brothers forecast.
Consumer Spending
Consumer spending, which accounts for more than two-thirds of the economy, grew at a 3 percent annual pace in the fourth quarter, following the previous three months' 6.9 percent jump, the largest since 1986, according to the median estimate of economists. Purchases have been rising since the first quarter of 1992, a record 47 straight quarterly increases. The average spending gain the past two decades was 3.6 percent. ``The economic recovery has reached a new, self-sustaining stage,'' said Robert DiClemente, an economist at Citigroup Global Markets Inc., in a report. A measure of inflation tied to GDP probably rose at a 1.3 percent annual pace compared with a 1.6 percent rise in the third quarter, according to the median estimate of economists surveyed//www.bloomberg.com