US economy should have regained strength in the 4th quarter, expansion in 2021 should be a record in 37 years - ISTOÉ DINHEIRO

ABT Electronics warehouse in Glenview, USA

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. economic growth likely picked up in the fourth quarter as companies replenished inventories to meet demand for goods, helping the country post its best performance in nearly four decades in 2021.

The expansion was fueled last year by strong fiscal stimulus and low interest rates. The momentum, however, seems to have lost steam in December amid Covid-19 infections with the Ômicron variant, which contributed to reducing spending and affecting activity in factories and in the service sector.

The Commerce Department’s fourth-quarter Gross Domestic Product report will be released this Thursday and is expected to support the Federal Reserve’s turn toward raising interest rates in March.

Fed Chair Jerome Powell said Wednesday after a policy meeting that “the economy no longer needs sustained high levels of monetary policy support” and that “it will soon be appropriate to raise” rates.

According to a Reuters poll of economists, GDP likely grew at an annualized rate of 5.5% in the last quarter. That would represent a jump from the 2.3% pace in the third quarter.

Estimates ranged from 3.4% to 7.0%. But the survey came ahead of Wednesday’s release of data that showed a record deficit in goods trade in December and an increase in retail inventories.

The strong accumulation of retail inventories has led economists to raise their estimates for GDP growth to 7.5%.

For the full year of 2021, expansion was estimated at 5.6%, which would be the strongest result since 1984. The economy contracted 3.4% in 2020, the biggest drop in 74 years.