GDP growth accelerates in 4Q
Led by increased consumer spending and stronger net exports, fourth-quarter gross domestic product growth rose from the prior three months, although a little slower than many expected but possibly at a rate that indicates the economic recovery is picking up speed. The Commerce Department said GDP growth rose an inflation-adjusted 3.2% in the final three months of 2010, up from 2.6% growth for the third quarter. Analysts surveyed by Econoday projected fourth-quarter GDP growth of 3.5% with a range of estimates between 2.9% and 5.4%. Economists polled by MarketWatch were also expecting GDP growth of 3.5% for the quarter. The Bureau of Economic Analysis said a 4.4% increase in nonresidential fixed investment also helped fuel growth in the fourth quarter. Exports rose 8.5% and imports declined 13.5% during the quarter narrowing the net export gap to $392.2 billion from $505 billion in the third quarter. The economy expanded by 2.9% for all of 2010, marking the largest yearly gain in five years. The accelerated rate in the fourth quarter "confirms that the economic recovery regained some lost momentum over the closing stages of last year," according to Paul Ashworth, chief U.S. economist with Capital Economics. He said the 4.4% increase in consumption was the biggest quarterly gain in almost five years. Although households used savings to fund the spending spree, with the personal saving rate dropping to 5.4% in the fourth quarter from 5.9% in the third, Ashworth said. "With the new payroll tax reduction kicking in on Jan. 1, we expect first-quarter GDP growth to be equally as strong, driven again by a good showing from consumption," he said. "Nevertheless, we also anticipate a slowdown in GDP growth later in 2011, as the stimulus begins to fade." The Commerce Department plans to report its second estimate on fourth-quarter GDP growth, based on more complete data, Feb. 25. Write to Jason Philyaw.