The US economy grew at a much faster rate than initially thought during the fourth quarter of 2001, logging the strongest quarterly gain for the year and supporting the belief the US economy is turning the corner to recovery, a government report showed today.
Gross Domestic Product (GDP), the broadest gauge of the economy's health, expanded at a revised 1.4 per cent rate in the final three months of last year, seven times the 0.2 per cent pace first estimated, the US Commerce Department said.
The sharp upward revision, driven by an increase in consumer and government spending and a downward revision in imports, supports Federal Reserve chairman Mr Alan Greenspan's assessment yesterday that the US recession was ending.
In the financial markets, the US dollar got a slight boost from the stronger-than-expected GDP numbers.
Even though the US economy has been officially in recession since last March, the downturn has been unusually mild by historical standards. The only negative quarter for GDP occurred in the third quarter, when it contracted 1.3 per cent.
A jump in government spending and a rush by consumers to take advantage of zero-percent financing for purchases of new cars powered the fourth-quarter GDP. Strong consumer spending helped companies run through $120 billion worth of inventories.
GDP during all of 2001 grew at 1.2 per cent, ahead of initial estimates of 1.1 per cent growth but still the weakest performance since a 0.5 per cent decline in 1991 in the midst of the nation's last recession.
Analysts say the enormous depletion of inventories strengthens their conviction that an economic recovery is at hand, as companies will need to step up production to replace the goods that have been flying off store shelves and showroom floors.
However there is ample evidence in the GDP report that the business sector is still weak.
Business spending on new plants and equipment plunged 13.1 per cent, a bigger decrease than the 12.8 per cent decline first estimated and the fourth straight quarterly decline.
Meanwhile, government spending grew 10.1 per cent in the fourth quarter, up from the 9.2 per cent rate first estimated and also the biggest rise since an 11.1 per cent gain in the second quarter of 1978.