US GDP climbs 3.2 percent, signaling momentum for 2014

Robust household spending and strong exports helped the U.S. gross domestic product (GDP) grow at a 3.2 percent annual rate in the fourth quarter, the Commerce Department said on Thursday, despite a slight drag from the 16-day federal government shutdown in October.

While that was a slowdown from the third quarter's brisk 4.1 percent pace, it was a far stronger performance than anticipated earlier in the quarter.

"The clear message is that the economy entered into 2014 with a lot of momentum," said Carl Tannenbaum, chief economist at Northern Trust in Chicago.

It was also welcome news in light of a 0.3 percentage point drag from October's partial government shutdown and a much smaller contribution to growth from a restocking by businesses. Economists have also warned that stagnant wages could chip away some of the momentum in early 2014.

Growth over the second half of the year came in at a 3.7 percent pace, up sharply from 1.8 percent in the first six months of the year. It was the biggest half-year increase since the second half of 2003.

Consumer spending, which accounts for more than two-thirds of economic activity, rose at a 3.3 percent rate and was the main driver of fourth-quarter growth. There was also help from other segments of the economy such as trade and business investment.

Government spending contracted at a 4.9 percent pace, however, reflecting the partial shutdown of the federal government in October. The Commerce Department said the shutdown had reduced GDP growth by 0.3 percent through reduction in hours worked by federal employees.

Despite the shutdown, a sturdy increase in demand should put the economy on a stronger growth path this year.

But wage growth, which has been stagnant as the economy deals with slack in the labor market, could curb that growth somewhat.

In a separate report, the Labor Department said Thursday that first-time applications for state unemployment benefits rose 19,000 last week to 348,000. 

Reuters