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Growth in U.S. Probably Picked Up on Gains in Spending, Exports

The economy in the U.S. probably grew at a faster pace in the fourth quarter, driven by the biggest gain in consumer spending in four years and rising exports, economists projected a report today will show.

Gross domestic product rose at a 3.5 percent annual pace, up from a 2.6 percent rate in the previous three months, according to the median estimate of 85 economists surveyed by Bloomberg News.

Ford Motor Co. and Apple Inc. are among companies benefiting from a pickup in household spending that is forecast to extend into 2011 as tax cuts put more money in Americans’ pockets. Federal Reserve policy makers this week said the improvement in growth hasn’t been enough to derail a plan for a second round of stimulus that will pump $600 billion into financial markets.

“Consumers were feeling more confident and able to unleash some pent-up demand,” said Robert Dye, a senior economist at PNC Financial Services Group Inc. “We’re going to see a recovery that broadens beyond the manufacturing sector into services, and from the globally integrated companies into the smaller companies.”

Economists surveyed by Bloomberg forecast GDP gains ranging from 2.9 percent to 5.4 percent.

Today’s estimate is the first of three for the quarter, with the other releases scheduled in February and March when more information becomes available.

Gasoline Prices

Other reports today are projected to show consumer sentiment fell in January as gasoline prices rose, while labor costs rose at a faster pace last quarter.

Consumer spending, which accounts for about 70 percent of the economy, increased at a 4 percent annual pace, the best showing since the last quarter of 2006, according to the survey median.

U.S. retailers’ 2010 holiday sales jumped 5.5 percent for the best performance in five years, data from MasterCard Advisors’ SpendingPulse showed last month, as shoppers snapped up clothing and jewelry at stores like Macy’s Inc., Tiffany & Co.

Apple posted record quarterly sales as customers snapped up 7.33 million iPad tablet computers in the first holiday season for the device, the company said last week.

Ford is among companies planning to increase payrolls this year as spending picks up, pointing to gains in employment that may further underpin the recovery.

Ford Hiring

The Dearborn, Michigan-based automaker plans to hire more than 7,000 workers in the next two years, including engineers with expertise in battery-powered cars, Mark Truby, a company spokesman, said in an interview in Detroit on Jan. 10.

The government’s extension last month of Bush-era tax cuts, renewal of emergency jobless benefits for the long-term unemployed and cuts to payroll taxes of 2 percentage points prompted economists such as Bruce Kasman at JPMorgan Chase & Co. in New York to raise forecasts for 2011.

The measures also let firms depreciate 100 percent of capital expenditures over the course of 2011. That will help sustain demand for equipment, which together with growing exports to China, Brazil and other fast-growing countries, has fueled the factory-led recovery that began in June 2009.

The Obama administration highlighted export deals with China worth $45 billion during talks with visiting President Hu Jintao last week, including purchases of General Electric Co. locomotives. Other agreements were announced with Caterpillar Inc., Cummins Inc., Westinghouse Electric Corp., Honeywell International Inc. and Alcoa Inc.

Obama on Exports

“We want to sell you all kinds of stuff,” Obama said to Hu during a joint news conference Jan. 20 at the White House. “We want to sell you planes, we want to sell you cars, we want to sell you software.”

Shares of machinery makers have outpaced the broader market since the Fed announced another round of unconventional easing on Nov. 3. The Standard & Poor’s Supercomposite Machinery Index has climbed 17 percent compared with an 8.5 percent increase for the S&amp;P 500 Index.

Measures of consumer confidence have been mixed this month, buffeted by rising fuel prices, improving stock values and a labor market that’s been slow to strengthen.

The Thomson Reuters/University of Michigan’s final sentiment index for January, due at 9:55 a.m., is projected to fall to 73.3 from 74.5 at the end of December, according to economists surveyed. That is in contrast to the New York-based Conference Board’s gauge which rose to an eight-month high in January.

Finally, a Labor Department report at 8:30 a.m. will show the employment cost index rose 0.5 percent in the fourth quarter after a 0.4 percent gain in the previous three months, according to the survey median.