The US economy grew at its fastest pace in 1.5 years in the fourth quarter, but a strong rebuilding of stocks by businesses and weak spending on capital goods hinted at slower growth in early 2012.
US gross domestic product expanded at a 2.8 per cent annual rate, the Commerce Department said today, a sharp acceleration from the 1.8 per cent clip of the prior three months and the quickest pace since the second quarter of 2010.
It was, however, a touch below economists expectations for a 3 per cent rate.
For the whole of 2011, the economy grew 1.7 per cent after expanding 3 per cent the prior year.
Growth in the fourth quarter got a temporary boost from the rebuilding of business inventories, which was the fastest since the third quarter of 2010, after they declined in the third-quarter for the first time since late 2009.
Inventories increased $56 billion, adding 1.94 percentage points to GDP growth. Excluding inventories, the economy grew at a tepid 0.8 per cent rate, a sharp step-down from the prior period's 3.2 per cent pace.The robust stock accumulation suggest the recovery will lose a step in early 2012.
Also pointing to slower growth, business spending on capital goods was the slowest since 2009, a sign the debt crisis in Europe was starting to take its toll.
Expectations of soft growth led the Federal Reserve on Wednesday to say it expected to keep interest rates at rock bottom levels at least through late 2014.
Fed chairman Ben Bernanke said the central bank, which forecast growth this year in a 2.2 percent to 2.7 percent range, was mulling further asset purchases to speed up the recovery.
Treasury secretary Timothy Geithner told the World Economic Forum in Davos the US economy still faced big challenges.
"We're still repairing the damage done by the financial crisis. On top of that we face a more challenging world. We have a lot of challenges ahead in the United States," he said.
Consumer spending, which accounts for about 70 per cent of US economic activity, stepped to a 2 per cent rate from the third-quarter's 1.7 per cent pace - largely driven by pent-up demand for motor vehicles.
The Japanese earthquake and tsunami had disrupted supplies early in the year, leaving showrooms bereft of popular models.
Spending was also lifted by moderate inflation.
A price index for personal spending rose at a 0.7 per cent rate in the fourth-quarter, the slowest increase in 1.5 years, after rising at a 2.3 per cent pace in the July-September period.
A core inflation measure, which strips out food and energy costs, increased at a 1.1 per cent rate after rising 2.1 per cent in the third quarter.The increase last quarter was the smallest in a year and put this measure well below the Fed's 2 per cent target.
Reuters
