Exports Probably Kept U.S. Economy Expanding in Fourth Quarter

Feb. 28 (Bloomberg) -- The U.S. economy in the fourth quarter slowed less than previously projected as exports grew, economists said before revised government figures today.

Growth advanced at an annual pace of 0.8 percent from October through December compared with the 0.6 percent estimated last month, according to the median forecast of 74 economists surveyed by Bloomberg News. The rate of expansion would still be the second weakest in five years.

Payrolls and consumer confidence have dropped and the housing slump has intensified so far in 2008, raising the odds that the world's biggest economy will tip into a recession. Federal Reserve Chairman Ben S. Bernanke yesterday signaled he's ready to reduce interest rates again to sustain the expansion.

Last quarter ``leaves us without much momentum,'' said Ryan Reed, an economist at National City Corp. in Cleveland. ``Consumer spending was lackluster and it looks like it's deteriorating further.'

The Commerce Department report on gross domestic product is due at 8:30 a.m. in Washington. Economists' forecasts ranged from gains of 0.5 percent to 1.3 percent.

A separate report today is forecast to show the number of Americans filing first-time claims for jobless benefits rose to 350,000 last week, from 349,000 a week earlier, according to the survey median.

The trade gap narrowed in December more than the government estimated in its advance GDP report last month. For all of last year, the deficit shrank for the first time since 2001, helped by record exports.

Drop in Demand

Today's revisions may show the rest of the economy would have contracted without the boost from trade, according to a forecast by economists at Credit Suisse Holdings in New York. Reductions to prior estimates for construction and for consumer, business and government spending signal a 0.2 percent drop in demand excluding trade, they said.

``One could argue that the domestic recession began'' last quarter, Neal Soss, chief economist at Credit Suisse, said in a Feb. 21 note to clients. ``But there would be no debating that the rest of the world kept U.S. GDP growth above water at the end of last year.''

Consumer confidence fell this month to the lowest level since the start of the Iraq war as the job market deteriorated, according to a report this week from the Conference Board, a New York-based research group. Americans' expectations for the next six months dropped to the lowest level since January 1991.

Spending Slows

The decline may threaten consumer spending, which accounts for more than two-thirds of the economy, and further hurt growth. A report tomorrow is projected to show that spending in January rose just 0.2 percent, matching the previous month's gain as the smallest in six months.

Lowe's Cos., the world's second-largest home-improvement retailer, said this week that fourth-quarter profit fell and several ``challenging'' quarters remain as the worst housing slump in more than 25 years deepened.

``It will still be a tough housing market through the balance of 2008,'' Lowe's Chief Executive Officer Robert Niblock said in a Feb. 25 interview. ``It'll probably be into 2009 before you're seeing a recovery.''

The Fed ``will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,'' Bernanke said in testimony to the House Financial Services Committee in Washington. Policy makers are scheduled to next vote on interest rates on March 18.

The U.S. central bank and the government are trying to head off a recession. President George W. Bush, on Feb. 13, signed a $168 billion stimulus package, including tax rebates to more than 130 million households.

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