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WASHINGTON — Stronger hiring and higher pay and savings should support solid growth for the economy in coming months.
That was a key message that emerged Wednesday from a report on economic growth in the final three months of 2011. The economy grew at a 3 percent annual rate in the October-December quarter, up from a previous estimate of 2.8 percent, the Commerce Department said.
Economists stressed that the fundamental drivers of the economy — incomes, consumer spending and business investment — are rising. They will likely sustain modest growth this year.
Expectations are for the economy to expand at a roughly 2 percent annual pace in the current quarter and about 2.5 percent for the full year, according to the National Association for Business Economics. That would be faster than last year’s 1.7 percent growth.
After taxes, inflation-adjusted incomes rose 1.4 percent in the fourth quarter. That’s nearly double the first estimate.
And in the third quarter, incomes rose 0.7 percent, compared with earlier estimates of a 1.9 percent drop.
A big reason for the higher estimate of growth in the October-December quarter was that consumers and businesses spent more than first thought.
The savings rate was revised higher. Americans saved 4.5 percent of their incomes in the October-December quarter. That was down slightly from the third quarter. But it topped the previous 3.7 percent estimate for the fourth quarter.
Growth would have been stronger last quarter if not for a steep drop in government spending. Cuts in federal defense spending, along with reduced spending at the state and local levels, shaved nearly a full point off growth.