U.S. economy grows faster than expected in fourth quarter

A recovery in manufacturing and gains in consumer spending help expand the nation's gross domestic product at a robust 5.7% annual rate.

By Don Lee
January 29, 2010 | 6:51 a.m.

Reporting from Washington - The U.S. economy grew at an accelerated pace in the last quarter of 2009, driven largely by a rebound in manufacturing and better-than-expected gains in consumer spending and commercial investments, according to Commerce Department statistics released today.

The nation's gross domestic product -- or total goods and services produced in the U.S. -- expanded at a robust 5.7 % annual rate in the fourth quarter. That's more than double the 2.2% growth in the third quarter and a dramatic turnaround from the first three months of 2009, when the economy shrank by 6.4%.

The latest GDP growth rate was about a percentage point higher than most economists' forecasts, with consumer spending and an upturn in commercial investments contributing more than what was expected. These are encouraging signs and could prompt analysts to raise their growth forecasts for this year.

Even so, the fuel behind the fourth-quarter acceleration won't last as it was mostly temporary: an extraordinarily big swing in inventory levels that accounted for 60% of the quarterly growth. With manufacturing recovering from the recession and consumers purchasing more, producers stopped their massive liquidation of stocks and many have begun to boost inventories.

It remains to be seen whether consumer purchases, exports and capital spending can grow enough to keep lifting production and sustain the economic recovery. Before today's report, analysts had predicted economic growth this year at between 2% and 3%, a moderate pace that would not be enough to spark much job creation or drive down unemployment significantly from its current 10% rate.

For all of 2009, the nation's total output of goods and services, after adjusting for inflation, contracted 2.4% from the previous year. The Commerce Department's report today is an "advance estimate" of the fourth-quarter GDP and will be revised two more times as statisticians collect more information.

don.lee@latimes.com

http://www.latimes.com/business/la-fi-e ... 6149.story