The world's largest economy grew at an annualised rate of 3.2% between October and December
The US economy regained momentum in the fourth quarter of last year, boosted by buoyant exports and the strongest consumer spending in more than four years.
GDP figures released today raised hopes that a sustainable recovery is under way, which will enable businesses to start hiring again.
The world's largest economy grew at an annualised rate of 3.2% between October and December, according to the US Commerce Department, faster than the third quarter's 2.6% rate. Economists had expected growth of 3.5%.
This rounded off the US economy's best year for five years - it expanded by 2.9% in 2010 as a whole, following a 2.6% contraction in 2009. The pick-up in US growth contrasts with the British economy shrinking by 0.5% in the last three months, which is a 2% decline in annualised terms.
Analysts said America's growth was closely linked to ongoing efforts to stimulate its economy, rather than to tackle its growing deficit.
"The US is expected to be one of the fastest growing developed countries in 2011, largely reflecting the contrast of the ongoing stimulus with other countries, such as the UK and other heavily indebted European nations, where austerity measures designed to reduce deficits are stifling domestic demand," said Chris Williamson, chief economist at research firm Markit in London.
US consumer spending, which makes up more than two-thirds of economic activity, rose by 4.4% in the final quarter - the fastest pace since the beginning of 2006. This added 3.04 percentage points to overall economic growth. "This is what we need for the recovery to be self-sustaining," said Harm Bandholz, chief US economist at UniCredit Research in New York.
Households had to dip into their savings to help fund that spending spree, however, with the personal saving rate dropping to 5.4% in the fourth quarter, from 5.9% in the third. The pick up in consumer spending helped to offset a slowdown in business investment.
A pick-up in exports also underpinned fourth-quarter growth, with trade adding 3.44 percentage points to GDP growth, the first contribution in a year.
However, millions are still out of work and the unemployment rate has been stuck above 9% since May 2009. Economists say the economy needs to expand by at least 3% over several quarters to alleviate unemployment, with the economy's "normal" growth potential estimated at 2.5% to 2.7%.
On Wednesday, Federal Reserve officials expressed concern that the pace of the recovery was still not strong enough to bring down unemployment and reiterated their commitment to a $600bn (�377bn) economic stimulus programme.
"The acceleration of US GDP in the fourth quarter, and the changing composition of growth, raises hope that the economic recovery will move into a more self-sustaining phase in 2011 and generate sufficient jobs to reduce unemployment," said Williamson. "Importantly, domestic demand appears to be providing a boost to growth alongside exports, taking over from inventory building, which had previously been a key - but only temporary - driver of the economy."
Source: http://www.guardian.co.uk/business/2011/jan/28/us-economic-recovery-hopes
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