MW: GDP accelerates to 3.2% rate in fourth quarter
U.S. economy’s moved into expansion phase, data indicate
By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) — The U.S. economy, fueled by gains in consumer spending, grew at a faster pace in the fourth quarter, raising hopes that it’s on self-sustaining path, government data showed Friday.
In its first estimate of growth in the fourth quarter, the Commerce Department said gross domestic product rose at a 3.2% annual rate between October and December, faster than the 2.6% pace in the prior three months.
Economists had expected a stronger 3.5% growth rate, however. See MarketWatch economic calendar.
In an important milestone, the level of GDP in the fourth quarter exceeded its previous peak.
This means that the economy has now moved from a recovery phase into an expansion phase of the business cycle
For all of 2010, the economy increased 2.9%, marking the biggest annual increase since 2005.
Still, the Federal Reserve concluded earlier this week that the economy isn’t growing at a sufficiently strong pace to make a “significant improvement” in the unemployment rate.
The U.S. central bank decided to keep in place a $600 billion bond-buying program designed to bring down long-term rates and push investors to take more risks and spark more activity. See more on the Federal Open Market Committee and monetary policy.
Consumer sector leads way
Consumers, typically the mainstay of the economy, fueled the faster pace of growth In the fourth quarter: Their spending increased at a 4.4% annualized rate — after having averaged 2.2% over the first three quarters of the year. Read the full government report.
Shoppers were out in force over the holidays, and auto sales were also strong.
Spending on durable goods rose 21.6%, while spending on nondurable goods gained by 5% and spending on services increased 1.7%, according to the Commerce Department.
Consumer spending added three percentage points to GDP.
There’s been some debate among economists over whether this pickup is sustainable. Indeed, consumers dipped into their savings in the quarter, as the savings rate declined to 5.4% from 5.9% in the third quarter.
