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 Friday.
Commerce's revised figures show that the gross domestic product, 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. That's welcome news to the Bush administration, because it enhances President Bush's argument that his policies have the nation's economy on track.
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 Corp. in Charlotte, N.C.
The strong figures support Federal Reserve Chairman Alan Greenspan's optimism before the Senate Budget Committee on Feb. 16, when he said the "evidence broadly supports the view that economic fundamentals have steadied."
Treasury Secretary John Snow said in a statement Friday that the numbers showed President Bush's tax cuts and economic policies had the economy "moving in the right direction" and were being felt by Americans.
"I was particularly pleased to see that business investment was revised up to a growth rate of 14 percent," Snow said. "Recent economic data for the first quarter, including the steep drop in new claims for unemployment insurance and robust growth in business spending on capital goods, show that this momentum is continuing into 2005."
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 C. 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 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.
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(c) 2005, Knight Ridder/Tribune Information Services.
GRAPHIC (from KRT Graphics, 202-383-6064): GDP
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