U.S. Economy Grows 3.2% in Q4:2010

U.S. economic growth picked up speed in last year’s fourth quarter, the Bureau of Economic Analysis reports. But the 3.2% pace of annualized real growth was below economists’ 3.6% consensus forecast. Still, a 3.2% gain for GDP represents a substantial acceleration from the third quarter’s 2.6% rise.

Much of the increase in growth in last year’s three months is due to a higher rate of consumer spending, which represents more than two-thirds of GDP. Personal consumption expenditures rose by a real annualized 4.4% in Q4:2010, up sharply from 2.4% in Q3:2010. Notably, consumer spending in the cyclically sensitive durable goods sector rose by even more, surging 21.6% in 2010’s fourth quarter, well above the 7.6% pace in Q3. That’s the biggest quarterly rise for durable goods spending in nine years.

“It’s a consumer-driven recovery,” says Burt White, chief investment officer at LPL Financial Corp, via Bloomberg. “People had been saying that the rebound in GDP was happening because of government spending and inventory build-up. Today’s numbers show that inventory isn’t the key to drive economic growth. It’s a self-sustaining recovery. That’s a positive for both consumer and investors’ sentiment.”

Perhaps, but some economists still worry that the pace isn’t strong enough to create enough new jobs to cure the elevated rolls of jobless in the U.S. “Unfortunately we still need to see much stronger growth to begin to really make a dent in the unemployment rate,” says Ryan Sweet at Moody’s Analytics via BBC News. “Right now we are just barely creating enough jobs to stabilize the unemployment rate.”

GDP for all of 2010 rose 2.9%, based on today’s advance estimate for Q4, which will be revised in the months ahead. Assuming last year’s 2.9% GDP gain holds, 2010’s economy expanded at the highest rate since the 3.1% rise for 2005.

About James Picerno 900 Articles

James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He writes for trade magazines read by financial professionals and financial advisers.

Over the years, he’s written for the Wall Street Journal, Barron’s, Bloomberg, Dow Jones, Reuters.

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