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Last updated: March 01. 2013 12:39AM - 1098 Views

Former Council of Economic Advisers Chairman under President Barack Obama, Austan Goolsbee, left, and economics professor Michael Boskin, a former Council of Economic Advisers chairman under President George W. Bush, prepare to testify on Capitol Hill in Washington, Thursday, Feb. 28, 2013, before the Joint Economic Committee hearing on state of the U.S. economy.  (AP Photo/J. Scott Applewhite)
Former Council of Economic Advisers Chairman under President Barack Obama, Austan Goolsbee, left, and economics professor Michael Boskin, a former Council of Economic Advisers chairman under President George W. Bush, prepare to testify on Capitol Hill in Washington, Thursday, Feb. 28, 2013, before the Joint Economic Committee hearing on state of the U.S. economy. (AP Photo/J. Scott Applewhite)
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WASHINGTON — The U.S. economy grew at a 0.1 percent annual rate from October through December, the weakest performance in nearly two years. But economists believe a steady housing rebound, stronger hiring and solid spending by consumers and businesses are pushing economic growth higher in the current quarter.


The Commerce Department’s second estimate of fourth-quarter growth was only slightly better than its initial estimate that the economy shrank at a rate of 0.1 percent. And it was well below the 3.1 percent growth rate reported for the July-September quarter.


The revision to the gross domestic product was due to higher exports and more business investment. GDP is the broadest measure of the economy’s output.


Many economists say temporary factors that held back growth in the fourth quarter are probably fading and growth is likely picking up in the January-March quarter.


Paul Ashworth, chief U.S. economist at Capital Economics, predicts growth could be as high as 2 percent in the current quarter despite higher Social Security taxes, which have reduced take-home pay for most Americans. Alan Levenson, chief economist for T. Rowe Price, said growth could be as high as 2.5 percent.


Ashworth noted that a sharp decline in defense spending and slower business restocking subtracted 2.9 percentage points from growth in the fourth quarter. At the same time, consumer spending and business investment — two key drivers of growth — accelerated at the end of last year.


“We still believe that the fourth-quarter GDP figures were a lot better than the headline stagnation suggests,” said Ashworth.


The economy could continue to struggle if policymakers in Washington cannot reach agreements over the budget his month, including billions of dollars in spending cuts that are set to begin today. And a spike in gas prices and higher taxes could hold back consumer spending.


Still, a raft of recent reports suggests that many aspects of the economy are improving.


The Labor Department said that the number of Americans seeking unemployment benefits fell 22,000 last week to a seasonally adjusted 344,000. The steep decline comes as hiring has strengthened, providing more income to consumers.


Employers have added an average of 200,000 jobs per month in the past three months. That’s up from an average of 150,000 in the previous three months.


More jobs and ultra-low mortgage rates are helping the once-battered housing market recover. New-home sales jumped 16 percent to their highest level in 4 ½ in January.


At the same time, the number of new homes available for sale remains near record lows. That means builders will likely have to start construction on more homes and apartments to keep up with demand. That should create more construction jobs.


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