GDP surges 5.7% on inventory slowdown
Fastest growth in 6 years, but spending, investment still weak
By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) -- Coming out of the worst recession in generations, the U.S. economy grew at the fastest pace in six years during the fourth quarter of 2009, even as consumer spending and business investment remained tepid, according to data released Friday by the Commerce Department.
Real gross domestic product increased at a 5.7% seasonally-adjusted annual rate in the final three months of the year, the best quarterly growth since late 2003, the government estimated. The economy grew 2.2% in the third quarter.
The 5.7% increase was in line with the 5.4% gain expected by economists surveyed by MarketWatch. The figures are subject to large revisions in coming months. Read our complete economic calendar and consensus forecast.
Even with healthy growth in the second half of the year, the economy shrank 2.4% in 2009, the worst year for GDP since the 10.9% drop in 1946, when the United States geared back to a peacetime economy. Business investment fell the most since 1942. Read the full report on the government's website.
In the fourth quarter of 2009, about two-thirds of the growth came via the swing in inventories. Excluding the change in inventories, final sales increased at a 2.2% annual rate, a signal that the economy remained weak despite stellar topline numbers.
Consumer spending increased at a 2% annual rate, down from 2.9% in the third quarter when the government's so-called cash-for-clunkers program boosted auto sales.
Business investment grew at a 2.9% annual rate, the first increase since the spring of 2008. Investments in equipment and software increased at a 13.3% annual rate, but investments in structures plunged at a 15.4% pace.
Investments in homes increased at a 5.7% pace, the second straight increase after 14 consecutive declines.
Foreign trade added to growth as well, with exports of goods increasing at a 28.1% annual rate, the best in 30 years.
Government spending fell at a 0.2% annual rate.
Most economists believe growth will slow in 2010 to about a 3% pace as the temporary boost from inventories wanes. They expect modest growth in consumer spending and business investment as consumers struggle against high unemployment, flat incomes and the need to pay down debts.
More details
In current dollar terms, GDP rose 6.4% to an annual rate of $14.5 trillion in the fourth quarter. For all of 2009, GDP totaled $14.3 trillion.
Final sales, which exclude inventories, increased at a 2.2% annual rate in the fourth quarter, the most since the spring of 2008. For all of 2009, final sales fell 1.7%, the largest decline since 1946.
Consumer spending rose at a 2% annual rate. For all of 2009, consumer spending fell 0.6%, the worst year since 1974. Spending on services for the year grew at the slowest rate in 71 years.
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