Official figures show that the US economy gathered speed in the fourth quarter, though a touch below expectations. The biggest gain in consumer spending in more than four years and strong exports offered the clearest signals yet that a sustainable recovery is under way.
The economy grew at a solid 3.2% annual rate in the final three months of 2010, the Commerce Department said, after expanding at a 2.6% pace in the third quarter. The fourth-quarter rise was a touch below economists' expectations for a 3.5% rate.
For the whole of 2010, the economy grew by 2.9%, the biggest gain since 2005. The economy shrank by 2.6% in 2009.
On Wednesday, Federal Reserve officials voiced concern that the pace of the recovery was still not strong enough to significantly lower unemployment and reiterated a commitment to a $600 billion stimulus effort through the purchase of government bonds. The jobless rate has been stuck above 9% since May 2009.
Details of the GDP report showed the economy moving in the right direction. Consumer spending, which accounts for more than two-thirds of US economic activity, grew at a 4.4% rate - the fastest pace since the first quarter of 2006.
Support for growth during the fourth quarter also came from a pick-up in exports, which resulted in a narrower trade deficit.
That offset the drag from business inventories, which increased a mere $7.2 billion after a $121.4 billion rise in the third quarter. Inventories, which had been the main driver of growth since the start of the recovery in the second half of 2009, subtracted from GDP growth for the first time since the second quarter of 2009.
Business spending on equipment and software notched its seventh straight quarter of growth, though the annual pace slowed to 5.8% from 15.4% in the previous quarter.
Although businesses have been hesitant to hire, they have used their vast cash reserves to buy new equipment and upgrade their technology.
Investment in home building and non-residential structures were surprise additions to growth in the fourth quarter. Home construction grew at a 3.4% pace, while structures expanded by 0.8% - the first growth since the second quarter of 2008. Government spending contracted, with much of the drag coming from state and local governments.
