Economy Grew 3.1% in 4th Quarter

Bloomberg reports:

The U.S. economy grew at a 3.1 percent annual rate in the fourth quarter, led by a jump in consumer spending that will be hard to match early in the year as energy prices surge.

The revised increase in gross domestic product compares with a 2.8 percent estimate issued last month, figures from the Commerce Department showed today in Washington. Earnings at financial firms led a 2.3 percent increase in corporate profits from October to December that capped the biggest annual gain in six decades.

Surging oil prices sparked by turmoil in the Middle East may erode consumers’ purchasing power, and supply constraints caused by the tragedy in Japan may slow the pace of recovery this quarter. At the same time, lean inventories and growing demand from emerging economies will probably keep benefiting companies like Caterpillar Inc. (CAT), sustaining the expansion.

“The upward revisions are encouraging, though things are shaping up to be a bit of a disappointment this quarter,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who correctly forecast the gain in GDP. “Consumer spending seems to be a little bit softer than we anticipated. We know we’ll hit speed bumps, but the recovery will gather momentum through the year and into 2012.”

Another report showed consumer sentiment this month declined more than forecast as surging fuel prices squeezed household budgets. The Thomson Reuters/University of Michigan final index of consumer sentiment for March fell to 67.5 from 77.5 in February, the group reported. ...