Stock prices have surged. On Wednesday, the Standard & Poor's 500 index was within two points of its all-time high reached.All of that is making consumers feel wealthier, which could lead to more spending. Consumer spending drives 70 percent of economic activity. The Federal Reserve still thinks the economy remains too weak to pull its support. Last week it stood by its plan to keep key short-term interest rate near zero until unemployment drops below 6.5 percent. The Fed also left unchanged its plan to keep buying $85 billion in bonds until it sees a substantial improvement in the job market.
WASHINGTON (AP) â¿¿ Economists expect that the government's latest reading of U.S. economic activity at the end of 2012 were not quite as weak as initially thought. And they say growth has accelerated since then, despite higher taxes and cuts in government spending. Analysts forecast that the economy grew at a 0.5 percent annual rate in the October-December quarter, according to a survey by FactSet. That would be better than the previous estimate of growth at a 0.1 percent annual rate. The Commerce Department will release the report on Thursday at 8:30 a.m. EDT. Analysts think the economy is growing at a rate of around 2.5 percent in the current January-March quarter, which ends this week. The government will issue its first estimate for first-quarter growth on April 26. Steady hiring has kept consumers spending this year. And a rebound in company stockpiling, further gains in housing and more business spending also likely drove faster growth in the first quarter. Growth appears to be strengthening, even after taxes increased on Jan. 1 and automatic government spending cuts totaling $85 billion started to take effect on March 1. The Congressional Budget Office has estimated that the combination of tax increases and spending cuts could trim economic growth this year by about 1.5 percentage points. The CBO is predicting just 1.5 percent growth for 2013. But so far, the economy is showing signs of holding its own against the fiscal drag. Employers have added an average of 200,000 jobs a month since November. That helped lower the unemployment rate in February to 7.7 percent, a four-year low. Economists expect similar job gains in March, in part because a measure of unemployment benefit applications fell this month to a five-year low. Sales of previously occupied homes rose in February to the highest level in nearly three years, while builders broke ground on more houses and apartments. Annual home prices jumped in January by the most since June 2006, according to a closely watched measure.