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Economic Preview: The U.S. economy likely sped up in the fourth quarter, but GDP to mask shortcomings


The U.S. economy sped up in the final three months of 2021, fourth-quarter GDP is likely to show, but the acceleration in growth also masked some weakness that persists early in the new year. Here’s what to watch.

Headline GDP number

Economists polled by The Wall Street Journal estimate gross domestic product rose by a 5.5% annual pace in the fourth quarter. Some Wall Street forecasters seen an even bigger increase. The report comes out at 8:30 a.m. Eastern on Thursday.

GDP rose by a slower 2.3% in the third quarter, when the delta strain of the coronavirus dented the economy and massive government stimulus began to fade. GDP is the official scorecard of sorts for the economy.

Companies stock up

The biggest driver of the economy in the fourth quarter was a major effort by U.S. businesses to restock barren shelves and warehouses. Companies ran low on inventories last year due to strong customer demand and ongoing labor and supply shortages that hindered production.

Businesses appear to have partly succeeded, but there are also signs that sales were a bit soft.

Economist Alex Pelle of Mizuho Securities said firms may have gotten “stuck with inventory” because the pent-up demand they expected did not fully materialize.

Consumer caution

To wit: Households likely increased spending in waning months of the year, but not extravagantly so. Outlays probably rose around 3%, up from 2% in the third quarter.

Many consumers may have bought Christmas gifts early because of highly publicized shortages of popular consumer goods, for one thing.

The surge in omicron cases toward the end of the year also dampened spending — a problem that persists early in 2022. GDP is on track to rise less than 2% in the first quarter, based on early economic data.

Business investment

Companies clearly tried to boost production and inventories, but they may have cut back on investment in equipment, office space and other large projects.

Higher costs due to rising inflation is one reason. So is a shortage of materials and uncertainty about when workers will return to the office.

Construction companies also faced price and supply constraints, especially home builders. Investment in new homes may have fallen for the third straight quarter.

Fading government stimulus

The federal government spent record sums of money on aid to Americans in 2020 and early 2021. But most of the extra money has now been spent. Government spending likely fell sharply in the fourth quarter.

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