ECONOMY:
 

Economy gauge still shows weakness

A revised reading of gross domestic product showed no change in the 0.6% annual growth rate in the fourth quarter.

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By David Goldman, CNNMoney.com staff writer

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A revised gross domestic product reading showed no change in the weak economic growth for the fourth quarter.

NEW YORK (CNNMoney.com) -- A revised reading on gross domestic product announced Thursday showed no change in the anemic U.S. economic growth previously reported for the fourth quarter.

GDP, the broadest measure of the nation's economic activity, stood at an annual rate of 0.6% in the fourth quarter, adjusted for inflation, the Commerce Department said.

The results matched the initial estimate released in late January, still far below the final reading of 4.9% growth in the third quarter.

Economists surveyed on Briefing.com expected the revised reading to show the economy grew at an annual rate of 0.8% in the fourth quarter.

But there were some positive numbers to take out of the revised report.

Changes in non-farm inventories shaved nearly 1.4 percentage points off overall growth, up from 1.2 percentage points in the previous report.

"The economy is stronger than the headline numbers suggest," said Wachovia Analyst Mark Vitner, who noted that the revised inventory numbers suggest the real GDP growth rate was 2%, up from a previously reported 1.8%.

Some economists have suggested that the increase in inventory liquidations represents a sign that businesses will pick up production in the first quarter in order to replenish those inventories.

"This will make it easier for the first quarter to have some positive growth," said Vitner, who expects to see GDP grow at an annual rate of 0.2% in the first quarter.

"It looks like the economy will narrowly avoid a recession, but it will still grow at a frustratingly slow pace," he added.

The government report also showed mixed news for inflation in the previous quarter.

The GDP price index, the so-called "price deflator," which measures prices overall, rose at a revised 2.7% annual rate, up from a previously-reported 2.6%.

But the core PCE deflator - a more closely watched inflation reading that measures prices that individuals pay excluding volatile food and energy prices - rose 2.5%, lower than the 2.7% that was reported in the first GDP report.

That's important because the rise is still above the perceived comfort zone of central bankers. The Federal Reserve is generally believed to want to see the 12-month change in core inflation readings remain between 1% and 2%.

The Fed has cut its key interest rate several times since September, lowering the rate to 3% from 5.25%, and some economists have suggested that continued weak economic indicators support the need for further rate cuts to boost the economy and stave off a recession.

But rising price pressures could tie the hands of central bankers, who not only seek to maintain economic growth, but aim to keep inflation in check as well. To top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.