GDP Rises 3.2%

GDP Advance Q4 Estimates show GDP increased by 3.2%, marginally lower than the expected 3.5% increase, after increasing by 1.7% in the second quarter and 2.6% in the third quarter of 2010. A sharp increase in consumer spending was the primary contributor to the increase in GDP. Consumer spending increased at a 4.4% annual rate in the fourth quarter, the largest increase since the first quarter of 2006. Inventories detracted from the pace of growth but this was largely offset by a positive contribution from net exports. GDP advanced 2.9% for the whole of 2010, the highest since 2005, compared with a 2.6% drop in 2009. This is the strongest growth rate in five years. The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, and nonresidential fixed investment that were partly offset by a negative contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased. The acceleration in real GDP in the fourth quarter primarily reflected a sharp downturn in imports, an acceleration in PCE, and an upturn in residential fixed investment that were partly offset by downturns in private inventory investment and in federal government spending and a deceleration in nonresidential fixed investment.

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