US GDP grew by 2.8 percent in final quarter 2011, fastest pace in over a year

GlobalPost

The gross domestic product of the United States grew by an annual rate of 2.8 percent in the last three months of 2011, the Department of Commerce said Friday.

That pace represents a sharp acceleration from the 1.8 percent growth in the third quarter, and according to Reuters is the fastest expansion since the second quarter of 2010.

It was nonetheless slightly less than the 3 percent analysts had predicted.

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For the whole of 2011, the US economy grew 1.7 percent. That's less than half its growth in 2010 – which was 3 percent – and the worst rate since the recession, according to the Associated Press.

Government spending fell at an annual rate of 4.6 percent in the fourth quarter and 2.1 over the whole of 2011, its biggest drop since 1971.

Consumer spending, which makes up most US economic activity, grew at a 2 percent annual rate in the fourth quarter, driven mostly by a rise in auto sales and other long-life manufactured goods.

But income growth has been non-existent or sluggish for several quarters, and this, combined with 8.5 percent unemployment, would weigh on consumer spending going into 2012, Reuters warned.

Economist Richard DeKaiser of the Parthenon Group told the AP he expected just 2 percent annual growth between January and March, though he saw the economy picking up in following quarters.

The Federal Reserve said this week that it expected unemployment to remain high and economic growth to be modest, prompting it to maintain short-term interest rates near zero. It has reduced its annual growth forecast to 2.7 percent for 2012, down from 2.9 percent.

"We're still repairing the damage done by the financial crisis," Treasury Secretary Timothy Geithner told the World Economic Forum in Davos. "On top of that we face a more challenging world. We have a lot of challenges ahead in the United States."

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