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Economy grew at 1.4% rate fourth quarter

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Today's revised gross domestic product (GDP) number came in at 1.4%, which was higher than economist's expectations of 0.4%, and much higher than the previously reported rate of 0.2%. The higher revised number was due in part to a large revision in retail sales in December and a much smaller-than-expected trade gap. Consumer spending on durable goods, such as cars and appliances, rose at a 39.2% pace in the fourth quarter of 2001. The question for many economists and investors is whether the consumer has the endurance to maintain their current rate of spending growth. In the fourth quarter of 2001, consumer spending grew at a 6% rate.

Strong government spending also rose in the fourth quarter. Contrary to expectations, most of the 10.1% gain was not entirely due to defense expenditures in the war against terrorism, but investments in roads, schools and other government subsidized infrastructure and services.

Federal spending rose 11.6% or $15.5 billion. Defense spending was up 9.4% to $8.2 billion, while non-defense spending increased 15.7% or $7.2 billion.

Jobless Claims

In a separate report, the Labor Department said first-time jobless claims rose 17,000 to 378,000 in the latest week. Continuing claims rose 66,000 to 3.49 million.

Stock futures higher

Stock futures have been to the upside since the release of this morning's economic data as S&P futures show a 3 point gain to 1,114. NASDAQ futures are up 6.5 points at 1,390, while Dow futures are betty by 30 points at 10,170.

Jeff Bailey
Senior Market Technician
Option Investor

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