Economic growth picks up pace during final quarter of 2011

The economy grew at a 3 percent annual rate during the final three months of last year, unchanged from the previous estimate, the best pace since spring 2010. 

Growth has picked up since a 1.8 percent showing during the third quarter of 2011, but economists are estimating that the economy slowed during the January-March period this year, the Commerce Department said Thursday. 

Meanwhile, corporate profits rose by 0.9 percent during the same period, the slowest pace since the fourth quarter of 2008, a possible signal that businesses remain cautious on hiring and investing in new equipment, economists estimate. 

Businesses showed a willingness in February to stock up on long-term, durable goods, with an increase of 2.2 percent, Commerce reported on Wednesday. Orders had dropped sharply in January. 

From December through last month the economy added 734,000 jobs and nearly 500,000 discouraged workers re-entered the workforce. 

Weekly jobless claims dropped against last week, a sign that March employment figures from the government could extend the streak of positive news to seven months. 

More jobs could mean a boost in consumer spending, which represents 70 percent of economic activity — that could lead to better growth later this year, economists say. 

Most economists say the unemployment rate, which was 8.3 percent in February, will probably hover around 8 percent for the rest of the year.

Meanwhile, consumer spending grew at a 2.1 percent annual rate in the final quarter, the same as previously estimated, Thursday's report showed. 

Still, economists are expecting that growth might have lost some steam during the first three months of this year — to probably around 2 percent — because businesses aren't restocking their inventories as quickly as they did at the end of last year. 

Businesses, which invested at a 5.2 percent annual rate during the final quarter of last year, have pulled back, following the expiration of a tax cut that allowed businesses to write off the costs of new equipment. 

Expanding inventories boosted growth, leading to 3 percent pace in the final quarter last year. 

But that growth was dinged by a larger trade gap caused by slower export growth — U.S exports grew at an annual rate of 2.7 percent in the fourth quarter, down from a previous estimate of 4.3 percent. 

The trade gap expanded to $410.8 billion from the previous estimate of $404.4 billion in the last three months of 2011.