The U.S. economy grew faster than had been estimated for the final quarter of 2004, carried by strong business spending on computers and inventories and solid production of motor vehicles.
WASHINGTON — The U.S. economy grew faster than had been estimated for the final quarter of 2004, carried by strong business spending on computers and inventories and solid production of motor vehicles, the Commerce Department reported yesterday.
The latest data for the gross domestic product (GDP) showed the economy growing at an annualized rate of 3.8 percent in the fourth quarter, up from last month’s 3.1 percent estimate and better than economists’ 3.5 percent forecast.
The news sent stocks substantially higher for the third straight session yesterday, with the Dow Jones industrial average and Standard & Poor’s 500 index each posting its best close of the year. The major indexes all finished a turbulent week higher.
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The Dow rose 92.81 to 10,841.60. It was the Dow’s best close since Dec. 28 and gave the blue chips a three-day gain of 230.40, following Thursday’s advance of 75.00 and Wednesday’s 62.59.
Microsoft, one of the 30 Dow stocks, dipped 12 cents to $25.25 a share yesterday. Boeing, also a Dow stock, gained $1.05 to $54.99.
Broader stock indicators were moderately higher. The S&P was up 11.17 at 1,211.37, its best showing since Dec. 31.
The technology-focused Nasdaq composite index gained 13.70 to 2,065.40.
The GDP report helped the dollar gain ground against the euro for the first time this week, though the dollar remained mixed against other currencies. The bond market edged higher on the news, with the yield on the 10-year Treasury note slipping to 4.26 percent.
Crude oil futures — which surged earlier this week as the dollar tumbled — fell slightly after the GDP report. A barrel of light crude closed at $51.49, up 10 cents, on the New York Mercantile Exchange.
The revised GDP figures, the broadest measure of the nation’s production of goods and services, grew by 3.8 percent in the final three months of 2004, 22.5 percent more than the earlier estimate of 3.1 percent. The agency routinely modifies quarterly projections as new data become available.
The numbers mean that the economy grew by 4.4 percent last year, the fastest clip since 1999.
The strong growth, which was aided by a smaller trade deficit than originally reported, could lead to faster job growth if businesses grow more confident, economists said. So far, job growth has lagged the nation’s recovery from a 2001 recession.
Economists said the revised fourth-quarter figures pointed to steady growth in 2005.
“The revision was a little bit larger than consensus,” said Mark Vitner, a senior economist with Wachovia in Charlotte, N.C.
The Commerce Department said higher-than-expected computer sales and motor-vehicle production were the main reasons the fourth-quarter growth was higher than had been estimated.
Economists will be keeping a close eye on business investment in the first quarter of 2005 to determine whether companies looking for tax advantages fueled the fourth-quarter 2004 growth.
William Dudley, the chief U.S. economist for investment giant Goldman Sachs, said many companies might have accelerated their spending on inventories in late 2004 to take advantage of a lapsing depreciation provision in the tax code. The provision wasn’t extended beyond 2004 as part of a tax deal between President Bush and Congress.
“It may also be that business confidence is recovering,” Dudley said, but “the jury is still out.”
The good growth numbers come on top of recent Labor Department figures that show gains in employment.
“Everything suggests that the economy is stronger than people have expected,” Dudley said.