The US economy accelerated in the fourth quarter of 2010 as consumer spending climbed by the most in more than four years.
Gross domestic product grew at a 3.2 per cent annual rate, Commerce Department figures showed today in Washington, falling short of the 3.5 per cent median forecast of 85 economists surveyed by Bloomberg News because of a slowdown in inventories. Excluding stockpiles, the economy rose at a 7.1 per cent pace, the most since 1984.
“The consumer really drove the economy in the fourth quarter,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who accurately forecast the rate of growth. “The economy has moved beyond recovery to a stable state of growth.”
The dollar advanced on expectations the revival in demand will extend into this year, boosting sales at companies including General Electric and Apple. At the same time, the report showed the Federal Reserve’s preferred measure of inflation climbed at the slowest pace on record, bolstering forecasts the central bank won’t raise borrowing costs until 2012.
Stocks fell as shares of Ford and Amazon.com retreated on concern over earnings. The Standard & Poor’s 500 Index fell 0.9 per cent to 1,287.37 at 11.08 am in New York. The dollar advanced against the euro for the first time in nine days, strengthening to $1.3634 per euro from 1.3734 yesterday.
For all of 2010, the world’s largest economy expanded 2.9 per cent, the most in five years, after shrinking 2.6 per cent in 2009. The volume of all goods and services produced rose to $13.38 trillion, for the first time surpassing the pre-recession peak reached in the fourth quarter of 2007.
“The environment continues to improve,” General Electric (GE) Chief Executive Officer Jeffrey Immelt said on a January 21 conference call. “The economy can get a little bit stronger every day.”
GE this month posted its third straight quarter of profit growth, beating analysts’ estimates, driven by a rebound in its finance unit, health-care and transportation divisions.
A separate report today showed consumer confidence fell less than expected in January, a signal the biggest part of the economy may extend the gains in spending.
The Thomson Reuters/University of Michigan final index of consumer sentiment decreased to 74.2 from 74.5 in December. The median forecast in a Bloomberg News survey called for a reading of 73.3, up from a preliminary figure of 72.7 issued earlier this month.
