The U.S. economy managed to barely expand in the fourth quarter, erasing a previously estimated contraction, as the smallest trade deficit in almost three years helped overcome the biggest plunge in military spending since the Vietnam War era.

Gross domestic product grew at a 0.1 percent annual rate, up from a previously estimated 0.1 percent drop, revised figures from the U.S. Commerce Department showed Wednesday in Washington. The median forecast of 83 economists surveyed by Bloomberg called for a 0.5 percent gain. Federal military outlays declined at a 22 percent annual pace, the biggest decrease since 1972.

The pace of growth indicates Federal Reserve policymakers are likely to maintain asset purchases intended to boost the expansion, which may be stalled by automatic government spending cuts set to take effect Friday. At the same time, healing in the residential real estate market and sustained gains in consumer spending even as the payroll tax rose show the economy probably picked up at the start of this year.

"The growth rate is still very pitiful," said Harm Bandholz, chief U.S. economist at UniCredit Group in Manhattan, who projected a 0.2 percent increase. "At least, the awkward minus sign disappears."


Fewer Americans than forecast filed applications for unemployment benefits this past week, showing companies were looking beyond looming government spending cuts and maintaining staffing, another report showed today. Jobless claims decreased by 22,000 to 344,000 in the week ended Feb. 23, the Labor Department reported in Washington. The median forecast of 44 economists surveyed by Bloomberg called for 360,000 applications.

Economists' projections for GDP, the value of all goods and services produced, ranged from a 0.1 percent drop to a gain of 1 percent. The estimate is the second of three for the quarter, with the final release scheduled for the end of March when more information becomes available.

advertisement | advertise on newsday

GDP grew 3.1 percent in the third quarter. For all of 2012, the economy expanded 2.2 percent after a 1.8 percent increase in the prior year.