Economy Grew at 3.2% Rate in 4th Quarter
The New York Times reports:
With a little more money in their wallets and a little less fear in their hearts, American consumers helped pull the economy up by its bootstraps in the fourth quarter of last year.
Gross domestic product, a broad measure of all the goods and services produced by the economy, grew at an annual rate of 3.2 percent in the fourth quarter, up from 2.6 percent in the previous period, according to a Commerce Department report released Friday.
As a result of this slightly speedier expansion, overall economic output has finally matched its prerecession peak. Still, given population growth and high unemployment, the economy has fallen far short of what it could be if it were healthy, economists said.
Thanks to modestly higher paychecks and swelled investment portfolios, Americans felt comfortable buying again and reducing how much they salted away. Consumer spending grew at an annual rate of 4.4 percent in the October-December period, its quickest pace in nearly five years and almost double the growth rate from the previous quarter.
““This year will be very good for the U.S. economy,” said Augustine Faucher, director of macroeconomics at Moody’s Analytics. “Stronger demand is building as consumer confidence strengthens.”
The payroll tax cut and the extension of the Bush tax cuts that were passed in December are expected to further buoy consumer spending, which many economists predict will continue to grow at an annual pace of about 3 or 3.5 percent in 2011.
The shrinking trade deficit also helped the economy regain some momentum.
Output growth had sputtered in the middle of 2010. That slowdown was largely the result of rocketing growth in imports, which are subtracted from the government’s calculations of gross domestic product. In the fourth quarter, however, a combination of rising exports and shrinking imports contributed to the faster output growth rate.
“In the middle of last year, imports showed the biggest drag on G.D.P. growth in more than 60 years,” said Dean Maki, chief United States economist at Barclays Capital. “That kind of rise in imports just wasn’t sustainable.”
Businesses also increased their spending on equipment and software, if not quite at the double-digit growth rates shown earlier in the year. Economists are hoping that these types of investments — and a replenishing of inventories, which ran low at the end of the last quarter — will soon be matched by investments in new workers as well.
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