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Economy grows at 5.7% pace in 4th quarter

Written By Trading Forex News on Saturday, January 30, 2010 | 3:52 AM

Economy grows at 5.7% pace in 4th quarter

The Commerce Department reported Friday that the economy grew at a 5.7 percent annual pace in the fourth quarter, the fastest growth rate in six years.

Much of the gain in the gross domestic product came from the rebuilding of inventories, which added 3.4 percentage points to the GDP, the most in two decades. Consumer spending, which accounts for nearly three-quarters of the economy, rose at a 2 percent pace after a 2.8 percent increase in the third quarter.

The fourth-quarter advance built on a 2.2 percent growth rate during the third quarter but was not enough to counterbalance a sluggish decline of 0.7 percent in the second quarter and the discouraging 6.7 percent decline in the first quarter. For 2009 as a whole, the economy shrank at a 2.4 percent rate, the worst annual performance since 1946.

The fourth quarter's performance topped the average analyst estimate of a 4.7 percent annual pace, according to a survey of 84 economists by Bloomberg News.

Anirban Basu, chief economist at Arlington-based Associated Builders and Contractors Inc., noted that the report contained some surprises.

"There are a number of encouraging elements to the report, including the fact that much of the fourth quarter's expansion had little to do with federal spending," he said. "Instead, output gains were largely attributable to America's technology sector, growing consumer activity and an improving global economy, which contributed to the surge in exports."

However, Basu remained cautious.

"Elements of the report are discouraging," he said. "Investment in nonresidential structures continues to decline even in the wake of the stimulus package passed last February, and many economists are concerned that the fourth-quarter surge in GDP will be largely a one-quarter phenomenon and that the economic recovery still remains fragile, especially given anticipated increases in various tax rates and interest rates this year and next."

Friday's report is the first of three the Commerce Department will issue on the fourth quarter of 2009. The second will be released in February as more information becomes available. The final report will be issued in March.

By Tucker Echols - Washington Business Journal

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