Saturday, January 30, 2010

US economy races back to enjoy strongest growth since 2003

The US economy enjoyed its fastest growth in more than six years in the final months of 2009, as a rebuilding of inventories by factories helped offset a weak jobs market.

The US economy grew by 5.7pc in October-December, the quickest pace in more than six years, with housebuilding getting a lift from a tax credit for first-time buyers

The world's biggest economy chalked up annualised growth of 5.7pc in the fourth quarter, beating the expectations of Wall Street analysts, and marking its best performance since 2003.

However, the figures from the Commerce Department in Washington D.C. also showed that the US economy contracted 2.4pc in 2009, its worst performance since just after World War II.


The numbers revealed a sharp slowing of the inventory cutbacks that have been forced on companies by a downturn that began in late 2007. A smaller drop in inventories alone contributed 3.4 percentage points of the growth in the quarter. Inventories declined at a much slower $33.5bn annual pace compared with $139.2bn rate in the third quarter. The second quarter had seen inventories fall at a record $160.2b pace in the second quarter.

Although there hasn't yet been official confirmation that the US is out of recession - that verdict comes later from its National Bureau of Economic Research - the numbers from the Commerce Department show it's growing again.

“Business are now feeling confident enough to deploy a larger portion of the recent strong corporate earnings rebound into new investment spending,” Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, told Bloomberg.

Despite signs of recovery, there is growing pressure on President Obama to the unemployment rate down from 10pc. The president used his key State of the Union address to Congress on Wednesday to outline measures to help the country's thousands of small businesses and get more people back to work.

The administration will be hoping that consumer spending, which makes up the lion's share of the economy, holds up in the face of longer unemployment queues. Today's figures show consumer spending climbed at a 2pc pace in the fourth quarter, weaker than the 2.8pc seen in the third quarter but still stronger than forecast.

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