Businesses are buying computers, software and other high-tech goods. This boosted the economy by 0.8 percentage points. Business spending on such goods rose by 12 percent for the quarter, the fourth consecutive quarter of double digit gains.
“They are finding the dollars and they are spending them,” says Naroff. “This tells me businesses are a little more confident.”
Inventories
Companies decided to rebuild their inventories. This added 1.44 percentage points to the economy, notes Fred Dickson, chief investment strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
“This is not surprising, business typically builds inventory in anticipation of holiday sales,” says Mr. Dickson. “I think the seasonal aspect explains some of it.”
Economists don’t expect the inventory accumulation to continue. “During the October-December quarter, inventories could be a significant drag on economic growth,” writes economist Sung Won Sohn of California State University, Channel Islands, in an analysis.
Interest Rates
The GDP report is unlikely to change anyone’s mind at the Federal Reserve about whether to begin a new program of lowering longterm interest rates. On Wednesday, the Fed is expected to announce it will start to buy longterm US Treasury debt as part of the program, called quantitative easing. That effort is controversial within the Fed with some governors warning about potential inflationary consequences and others concerned about deflation or the lowering of prices if nothing is done.
