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Business
See other Business Articles

Title: Economy Grows at 3.2% Pace, Pushed Up by Sales Spike [CNBC Shills Pure Crap- No Growth, Just Big INFLATION]
Source: [None]
URL Source: http://www.cnbc.com/id/41309932
Published: Jan 28, 2011
Author: Reuters
Post Date: 2011-01-28 11:10:51 by Capitalist Eric
Keywords: None
Views: 2314
Comments: 2

The U.S. economy gathered speed in the fourth quarter with a big gain in consumer spending and strong exports pushing demand ahead at the fastest clip in more than 26 years.

The economy grew at a solid 3.2 percent annual rate in the final three months of 2010, but it would have risen at a 7.1 percent rate if businesses had not put the brakes on rising inventories, the Commerce Department said Friday.

It was the largest rise in final demand since the second quarter of 1984.

"The conclusion is the economy appears to be self-sustaining," said Fred Dickson, chief market strategist at The Davidson Cos in Lake Oswego, Oregon.

Economists had expected GDP to rise at a 3.5 percent rate after expanding at a 2.6 percent pace in the third quarter, but the composition of growth gave the report a robust tenor.

For the whole of 2010, the economy grew 2.9 percent, the biggest gain since 2005. The economy contracted 2.6 percent in 2009.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 4.4 percent rate in the final three months of last year—the fastest pace since the first quarter of 2006. It added 3.04 percentage points to GDP growth, its largest contribution in more than four years.

Support to growth during the fourth quarter also came from a pick-up in exports, which resulted in a narrower trade deficit. Trade added 3.44 percentage points to GDP growth, the first contribution in a year, and the biggest since 1980.

Some economists said that contribution was unlikely to last and that a 3.4 percent gain in domestic demand was a better indicator of the economy's underlying strength.

The contribution from trade helped offset the drag from business inventories, which increased a mere $7.2 billion after a $121.4 billion rise in the third quarter. Inventories, which had been the main driver of growth since the start of the recovery in the second half of 2009, subtracted from GDP growth for the first time since the second quarter of 2009.

"When you have this level of sales without an increase in inventory, there is room for further room for increase in production," said Richard DeKaser, an economist at The Parthenon Group in Boston.

Employment Still Lagging

Even with growth quickening, however, progress reducing unemployment has been painfully slow, and the report is little comfort for unemployed Americans or Federal Reserve officials on a jobs-creation vigil.

On Wednesday, Fed officials voiced concern the pace of the recovery was still not strong enough to significantly lower unemployment and reiterated a commitment to a $600 billion stimulus effort through the purchase of government bonds.

The jobless rate has been stuck above 9 percent since May 2009. With the economy's growth potential between 2.5 percent and 2.7 percent, analysts say an expansion rate of at least 3 percent over several quarters is needed to cope with new entrants in the labor market and the unemployed.

The unemployment rate fell to 9.4 percent in December from 9.8 percent in November.

Business spending on equipment and software notched its seventh straight quarter of growth, though the pace slowed to 5.8 percent from 15.4 percent in the prior quarter.

Although businesses have been hesitant to hire, they have used their vast cash reserves to buy new equipment and upgrade their technology.

Investment in home building and nonresidential structures were surprise additions to growth in the fourth quarter. Home construction grew at a 3.4 percent pace, while structures expanded at a 0.8 percent—the first growth since the second quarter of 2008.

Government spending contracted, with much of the drag coming from state and local governments.

The advance GDP report also showed a rise in the personal consumption expenditures price index, reflecting the recent surge in food and gasoline prices. The overall PCE price index rose at a 1.8 percent rate after increasing at a 0.8 percent pace in the third quarter.

But the core PCE price index, which excludes food and energy costs, advanced at a record low 0.4 percent pace after rising at a 0.5 percent rate in the previous quarter, highlighting the Fed's concerns about low underlying inflation.

A separate report from the Labor Department showed employment costs rose just 0.4 percent in the fourth quarter, while compensation costs rose only 2 percent last year, the second slowest pace on record.

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It seems that the propaganda is no longer working... The latest comments from the article:

Spin1 | Jan 28, 2011 08:41 AM ET

"Even with growth quickening,"

Growth quickening? Are you kidding me? 3.2% is nothing, especially when it is a made up number. Report Abuse 720MP | Jan 28, 2011 08:43 AM ET

excluding inventories rose 7.1 % which by the way was the highest rate since 1984 leave it to reuters to fail to point that out figures they partner with cnbc Report Abuse Spin1 | Jan 28, 2011 08:43 AM ET

It will be revised downward again after they have a chance to let the market rally a little. Then a few months down the road, the true number will come out. Report Abuse 720MP | Jan 28, 2011 08:44 AM ET

spin

go play with the bottle or maybe do some work for a change must be a sad thing to be so negative

Report Abuse fredski | Jan 28, 2011 08:44 AM ET

With this much STRENGTH I guess we wont be needing any more stimulus, right?

Don't believe phony pumped up numbers that are designed to restore shattered confidence. Keep trying Ben, some actually believe everything is okay again. Report Abuse stocker3001 | Jan 28, 2011 08:44 AM ET

Hate to say it...this number blows big time since with all the stimulus..all the spending...where the heck did all the money go...we really should be a bit better than this!!! Report Abuse DoctorDoom | Jan 28, 2011 08:45 AM ET

Proves my point. Without consumer spending for the holidays the GDP is around 2% and that is horrible. Hedge accordingly! 2011 1st quarter numbers should end up around 1.5% to 2%! Report Abuse Aunt_Bee | Jan 28, 2011 08:46 AM ET

"The last official act of any government is to loot the treasury.” ~ George Washington

http://911essentials.com Report Abuse MSMILLER | Jan 28, 2011 08:51 AM ET

It is almost becoming humorous.

"Dead man looks great before burial" says Reuters and the AP. Friends were quoted as saying "He didn't look sick, in fact, he looked better than ever ...much better than expected"

Capitalist Eric  posted on  2011-01-28   11:12:57 ET  Reply   Untrace   Trace   Private Reply  


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