U.S. Economic Growth Revised to 0.1%, Consumer Spending at 2.1% Rate

Nichole Harper
28 Feb, 2013
New York City

Stocks in early trading searched for direction after economic growth was revised to 0.1% increase. Consumer spending increased as 2.1% annual rate and residential construction growth was revised to 17.5%. Weekly jobless claims declined. Lawmakers struggle to avoid $85 billion cuts in spending.

[R]11:45 AM New York – Stocks in early trading searched for direction after economic growth was revised to 0.1% increase. Consumer spending increased as 2.1% annual rate and residential construction growth was revised to 17.5%. Weekly jobless claims declined. Lawmakers struggle to avoid $85 billion cuts in spending.[/R]

Stocks traded sideways after the fourth quarter GDP growth was revised to an increase and weekly jobless claims declined.

December quarter estimate of the economic growth was revised to an increase of 0.1% annual rate from the previous estimate of the contraction by 0.1%. Economists were anticipating an increase of as much as 0.5%.

The revised data from the Commerce Department showed that the largest decline in defense spending was overshadowed by the smallest trade deficit in nearly three years.

The economic expansion was the slowest since the first quarter of 2011 and most of the weakness was in the slowdown in inventory accumulation and a sharp decline in military spending. However, consumer spending increased at annual rate of 2.1%.

Excluding volatile inventories component, GDP increased at a revised 1.7% annual pace from the previous estimate of 1.1% increase. Residential construction growth was revised slightly higher to 17.5%.

Weekly initial jobless claims declined at the end of last week to 344,000.

The number of people collecting extended payments increased by 187,000 to 2.01 million in the week ending on Feb 9.

In the short week because of the holiday, the number of people collecting unemployment insurance dropped to the lowest level since June 2008.

More people are expected to file unemployment claims if lawmakers fail to agree on budget cuts by today. So called sequestration process is expected to kick in $85 billion.

Stocks in Review

Broadsoft plunged 29% after the software company reported earnings ahead of expectations but guided lower than expected outlook for the quarter and the year.

J.C. Penney dropped 18% after the department-store chain operator reported a larger than expected loss and also chief executive admitted mistakes on retail discounting strategies. Sales in the critical holiday period fell more than expected and sales on the Internet also declined.

Groupon plunged 25% after the online-coupon company reported a loss when investors were anticipating profit and first quarter revenues outlook fell short of expectations.

Kohl’s decreased 3.5% after the department store reported earnings outlook for the quarter and the year below expectations.