Fourthquarter GDP forecast to increase at a 2.0 rate
Consumer, government spending seen driving growth
Inventory investment likely a drag on GDP growth

WASHINGTON, Jan 25 Reuters The U.S. economy likely grew at its slowest pace in 112 years in the fourth quarter as businesses throttled back on inventory investment and consumer spending cooled a bit, but the pace was probably enough to have kept a recession at bay in 2023.

The Commerce Department39;s advance fourthquarter gross domestic product report on Thursday, which is also expected to show inflation moderating last quarter, will reinforce expectations that the Federal Reserve will start cutting interest rates some time in the first half of this year.

We are expecting growth to come in right in the sweet spot for the Fed, said Scott Anderson, chief U.S. economist at BMO Capital Markets in San Francisco. Slow enough to keep downward pressure on inflation, but solid enough to keep the economy growing in the first half of 2024.

According to a Reuters survey of economists, GDP likely increased at a 2.0 annualized rate last quarter. That would be the slowest since the second quarter of 2022 and follows a 4.9 pace of acceleration in the JulySeptember quarter. Estimates ranged from a 0.8 rate to a 2.8 pace.

The economy would still be expanding at a pace above what Fed officials regard as the noninflationary growth rate of around 1.8. Growth for the full year is expected to come in at about 2.5, picking up from the…