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U.S. Economy Grew at 3.2% Rate in the 4th Quarter
By CATHERINE RAMPELL
Published: January 28, 2011
With a little more money in their wallets and a little less fear in their hearts, American consumers helped pull the economy up by its bootstraps in the final months of last year.
The gross domestic product, a broad measure of the goods and services produced in the country, grew at an annual rate of 3.2 percent in the fourth quarter, up from 2.6 percent in the previous period, according to a Commerce Department report released Friday.
Because of this slightly speedier expansion, the nation’s overall economic output has finally matched its peak before the recession. Still, given the millions of jobless American workers, the economy has fallen far short of what it could be if it were healthy, economists said.
“Things are better, but they’re not anywhere near where they need to be to make major inroads into unemployment,” said John Ryding, chief economist at RDQ Economics.
Thanks to modestly higher paychecks and swelled investment portfolios, Americans appeared more comfortable buying again and stashing away a little less in savings.
Consumer spending grew at an annual rate of 4.4 percent in the October-December period, its quickest pace in nearly five years and almost double the growth rate from the previous quarter.
The payroll tax cut and the extension of the Bush-era tax cuts, both passed in December, are expected to further buoy consumer spending, which many economists predict will grow at an annual pace of about 3 or 3.5 percent this year.
The shrinking trade deficit also helped the economy regain some momentum in the final months of the year.
Economic growth, after a surge in late 2009, began to sputter in the spring of last year. The slowdown was largely the result of rocketing growth in imports, which are subtracted from the government’s calculations of gross domestic product. In the fourth quarter, however, a combination of rising exports and shrinking imports helped the economy expand at a faster pace. “In the middle of last year, imports showed the biggest drag on G.D.P. growth in more than 60 years,” said Dean Maki, chief United States economist at Barclays Capital. “That kind of rise in imports just wasn’t sustainable.”
Businesses also increased their spending on equipment and software as the year concluded, though not quite at the double-digit growth rates shown earlier in the year. Economists are hoping that these types of investments — and a replenishing of inventories, which ran low at the end of the last quarter — will soon be matched by investments in new workers as well.
“Firms have the cash to hire,” said Augustine Faucher, director of macroeconomics at Moody’s Analytics. “They just need the confidence to do so, and that could develop quickly.”
The overall economic growth rate came in slightly below analysts’ expectations, which was an annual pace of 3.5 percent in the fourth quarter. The preliminary number released by the Commerce Department on Friday was about apace with forecasts for the full year. The Congressional Budget Office forecast that the economy would grow 3.1 percent in 2011, a figure echoed by many Wall Street analysts.
While that rate would be faster than last year’s, it is still probably not robust enough to make a significant dent in the unemployment rate, which stood at 9.4 percent in December. In the couple of years before the recession, which began in December 2007, the American jobless rate was less than half that level.
“We’re still very much below the output growth rate needed to absorb the slack in labor market,” said Prajakta Bhide, a research analyst for the United States economy at Roubini Global Economics. “We’re expecting to end the year with an unemployment rate of 9 percent.”
The Treasury secretary, Timothy F. Geithner, speaking in an interview Friday at the World Economic Forum in Davos, Switzerland, said that “brutal” job cuts early in the recession “consign us to a tragically more moderate reduction in unemployment as the economy recovers.” But he said he had growing confidence that the United States economy would continue to expand.
The International Monetary Fund has predicted that other rich countries, like those in the euro zone, will have modest growth in the coming year, while China will surge ahead with growth nearing 10 percent. Though the rapid-fire growth in emerging markets may push the prices of food and energy higher, these developing countries could help increase global growth by encouraging more trade.
“There are concerns here that China is managing its exchange rate, and that does limit the upside for U.S. exporters,” said Paul Ashworth, a senior United States economist at Capital Economics. “But in general, stronger growth in developing countries, as long as it’s sustainable and not the result of a credit boom that could come crashing down, should benefit developed countries like the United States as well.”
http://www.nytimes.com/2011/01/29/bu...owth&st=Search
By CATHERINE RAMPELL
Published: January 28, 2011
With a little more money in their wallets and a little less fear in their hearts, American consumers helped pull the economy up by its bootstraps in the final months of last year.
The gross domestic product, a broad measure of the goods and services produced in the country, grew at an annual rate of 3.2 percent in the fourth quarter, up from 2.6 percent in the previous period, according to a Commerce Department report released Friday.
Because of this slightly speedier expansion, the nation’s overall economic output has finally matched its peak before the recession. Still, given the millions of jobless American workers, the economy has fallen far short of what it could be if it were healthy, economists said.
“Things are better, but they’re not anywhere near where they need to be to make major inroads into unemployment,” said John Ryding, chief economist at RDQ Economics.
Thanks to modestly higher paychecks and swelled investment portfolios, Americans appeared more comfortable buying again and stashing away a little less in savings.
Consumer spending grew at an annual rate of 4.4 percent in the October-December period, its quickest pace in nearly five years and almost double the growth rate from the previous quarter.
The payroll tax cut and the extension of the Bush-era tax cuts, both passed in December, are expected to further buoy consumer spending, which many economists predict will grow at an annual pace of about 3 or 3.5 percent this year.
The shrinking trade deficit also helped the economy regain some momentum in the final months of the year.
Economic growth, after a surge in late 2009, began to sputter in the spring of last year. The slowdown was largely the result of rocketing growth in imports, which are subtracted from the government’s calculations of gross domestic product. In the fourth quarter, however, a combination of rising exports and shrinking imports helped the economy expand at a faster pace. “In the middle of last year, imports showed the biggest drag on G.D.P. growth in more than 60 years,” said Dean Maki, chief United States economist at Barclays Capital. “That kind of rise in imports just wasn’t sustainable.”
Businesses also increased their spending on equipment and software as the year concluded, though not quite at the double-digit growth rates shown earlier in the year. Economists are hoping that these types of investments — and a replenishing of inventories, which ran low at the end of the last quarter — will soon be matched by investments in new workers as well.
“Firms have the cash to hire,” said Augustine Faucher, director of macroeconomics at Moody’s Analytics. “They just need the confidence to do so, and that could develop quickly.”
The overall economic growth rate came in slightly below analysts’ expectations, which was an annual pace of 3.5 percent in the fourth quarter. The preliminary number released by the Commerce Department on Friday was about apace with forecasts for the full year. The Congressional Budget Office forecast that the economy would grow 3.1 percent in 2011, a figure echoed by many Wall Street analysts.
While that rate would be faster than last year’s, it is still probably not robust enough to make a significant dent in the unemployment rate, which stood at 9.4 percent in December. In the couple of years before the recession, which began in December 2007, the American jobless rate was less than half that level.
“We’re still very much below the output growth rate needed to absorb the slack in labor market,” said Prajakta Bhide, a research analyst for the United States economy at Roubini Global Economics. “We’re expecting to end the year with an unemployment rate of 9 percent.”
The Treasury secretary, Timothy F. Geithner, speaking in an interview Friday at the World Economic Forum in Davos, Switzerland, said that “brutal” job cuts early in the recession “consign us to a tragically more moderate reduction in unemployment as the economy recovers.” But he said he had growing confidence that the United States economy would continue to expand.
The International Monetary Fund has predicted that other rich countries, like those in the euro zone, will have modest growth in the coming year, while China will surge ahead with growth nearing 10 percent. Though the rapid-fire growth in emerging markets may push the prices of food and energy higher, these developing countries could help increase global growth by encouraging more trade.
“There are concerns here that China is managing its exchange rate, and that does limit the upside for U.S. exporters,” said Paul Ashworth, a senior United States economist at Capital Economics. “But in general, stronger growth in developing countries, as long as it’s sustainable and not the result of a credit boom that could come crashing down, should benefit developed countries like the United States as well.”
http://www.nytimes.com/2011/01/29/bu...owth&st=Search
