The U.S. economy grew more quickly than previously estimated in the fourth quarter as businesses maintained fairly solid spending and restocked shelves to meet rising demand, while corporate profits increased 3.3 percent, a government report showed on Friday.
Gross domestic product growth was revised up to an annualized rate of 3.1 per cent, the Commerce Department said in its final estimate, close to its initial estimate of 3.2 per cent published two months ago and up from its tally of 2.8 per cent made in February.
Economists had expected GDP growth, which measures total goods and services output within U.S. borders, to be revised up to a 3-per-cent pace. The economy expanded at a 2.6-per-cent rate in the third quarter. For the whole of 2010, the economy grew 2.9-per-cent, while corporate profits grew 20.4 per cent, the most since 2004.
Data so far suggest the economy maintained this growth pace in the first quarter, but there are concerns that rising oil prices could crimp consumer spending and slow the economic recovery.
The pick-up in growth has been acknowledged by the Federal Reserve, which injected massive amounts of money into the economy to stimulate demand. The U.S. central bank is expected to conclude its $600-billion government bond buying program at the end of June.
The government raised fourth-quarter growth estimates to reflect stronger business spending and inventory accumulation than previously forecast.
Business investment rose at a 7.7-per-cent rate instead of 5.3 per cent, lifted by spending on equipment and software, as well as on structures. Spending grew at a 10-per-cent pace in the third quarter.
Spending on software and equipment increased at a 7.7-per-cent rate instead of 5.5-per-cent. Investment in structures rose at a solid 7.6 per cent, the first increase since the second quarter of 2008.
Business inventories increased $16.2-billion instead of the $7.1-billion estimated last month, subtracting a smaller 3.42 percentage points from GDP growth rather than the previously reported 3.70 percentage points drag.
Excluding inventories, the economy expanded at an unrevised 6.7-per-cent pace, the fastest increase in domestic and foreign demand since 1998. Domestic purchases grew at a 3.2-per-cent rate instead of 3.1 percent.
Consumer spending - which accounts for more than two-thirds of U.S. economic activity - grew at a 4-per-cent rate in the final three months of 2010 instead of 4.1 per cent. It was still the fastest since the last three months of 2006 and was an acceleration from the third quarter's 2.4-per-cent rate.
The growth in exports was not as strong as previously estimated, while imports were revised a touch down. Trade added 3.27 percentage points to GDP growth instead of 3.35 percentage points. Government spending contracted at a 1.7-per-cent rate rather than 1.5 per cent, due to weak state and local government outlays.
The GDP report confirmed a pick-up in inflation pressures on surging food and gasoline prices. The personal consumption expenditures (PCE) index rose at a revised 1.7-per-cent rate in the fourth quarter instead of 1.8 per cent. That compared to the third quarter's 0.8-per-cent increase.
But a "core" price index closely watched by the Fed advanced at a revised 0.4-per-cent rate instead of 0.5 per cent. The increase was the smallest rise on record.