U.S. Economy Grew at 2.8% Pace in Fourth Quarter
The U.S. economy grew at its fastest pace since the second quarter of 2010 in the three months ended in December, but a strong rebuilding of stocks by businesses and weak spending on capital goods signaled an impending slowdown in early 2012.
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U.S. gross domestic product grew at a 2.8 percent annual rate in the fourth quarter, the Commerce Department reported on Friday in Washington, after growing at a 1.8 percent clip in the previous three months.
Despite growing at its fastest pace in 1 1/2 years, the U.S. economy still grew less than expected in the fourth quarter, falling just below projections for a 3.0 percent growth rate. The U.S. economy grew 1.7 percent in the whole of 2011 after expanding 3 percent in 2010.
“The economy ended 2011 on a fairly positive note, but the composition of growth in the last quarter is not favorable for growth early this year,” said Ryan Sweet, a senior economist at Moody’s Analytics, ahead of this morning’s report.
Fourth-quarter growth got a temporary boost from the rebuilding of business inventories after they declined in the third quarter for the first time since late 2009. Inventories increased by $56.0 billion, the most since the third quarter of 2010, adding 1.94 percentage points to GDP growth. Excluding inventories, the economy grew just 0.8 percent in the fourth quarter, a sharp step down from the previous quarter’s 3.2 percent pace.
Exports held up despite slowing global demand, but an increase in imports widened the trade gap, slicing off 0.11 percentage points from GDP growth.
Business spending on capital goods was the the slowest since 2009, growing at a 1.7 percent rate after growing at a 15.7 percent rate in the third quarter, while a heavy rebuilding of stocks in the fourth quarter suggests the recovery will take a hit in early 2012.
Expectations for soft growth led the Federal Reserve to say on Wednesday it expected to keep interest rates near record lows at least through late 2014, extending its promise by more than a year.
However, though analysts are anticipating a slowdown this year, they do not believe the economy will fall into recession.
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