The US economy grew at its fastest pace in 18 months in the fourth quarter of 2011, but a strong rebuilding of stocks by businesses and weak spending on capital goods hinted at slower growth in early 2012.
US gross domestic product expanded at a 2.8% annual rate, the Commerce Department said today, a sharp acceleration from the 1.8% pace of the previous three months and the quickest pace since the second quarter of 2010.
It was, however, a touch below economists expectations for a 3% rate.
Growth in the fourth quarter got a temporary boost from the rebuilding of business inventories, which was the fastest since the third quarter of 2010, after they declined in the third-quarter for the first time since late 2009. Inventories increased $56 billion, adding 1.94 percentage points to GDP growth.
Excluding inventories, the economy grew at a tepid 0.8% rate, a sharp step-down from the prior quarter's 3.2% pace.
Also pointing to slower growth, business spending on capital goods was the slowest since 2009, a sign the debt crisis in Europe was starting to take its toll.
Expectations of soft growth led the Federal Reserve on Wednesday to say it expected to keep interest rates at rock bottom levels at least until late 2014.
Fed Chairman Ben Bernanke said the central bank, which forecast growth this year in a 2.2% to 2.7% range, was mulling further asset purchases to speed up the recovery. The Fed warned the economy still faced big risks, a suggestion the euro zone debt crisis could still hit hard.
Meanwhile, Treasury Secretary Timothy Geithner told the World Economic Forum in Davos that the US economy still faced big challenges.
"We're still repairing the damage done by the financial crisis. On top of that we face a more challenging world. We have a lot of challenges ahead in the US," Geithner said.
Consumer spending, which accounts for about 70% of US economic activity, stepped to a 2% rate from the third-quarter's 1.7% pace - largely driven by pent-up demand for motor vehicles.
The Japanese earthquake and tsunami had disrupted supplies early in the year, leaving showrooms bereft of popular models. Spending was also lifted by moderate inflation.
