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US economy grows 5.7%

Exceeds expectations of analysts Bloomberg Published: 00:00 January 30, 2010 Washington: The economy in the US expanded in the fourth quarter at the fastest pace in six years as factories cranked up assembly lines and companies increased investment in equipment and software.
The 5.7 per cent increase in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance since the third quarter of 2003, figures from the Commerce Department showed on Thursday in Washington. Efforts to rebuild depleted inventories contributed 3.4 percentage points to GDP, the most in two decades.
Manufacturers such as Intel Corp may keep leading the recovery as increasing sales prompt companies to restock. A slowdown in consumer spending last quarter is a reminder that 10 per cent unemployment is causing Americans to hold back, one reason why the Federal Reserve is keeping interest rates low and the Obama administration is proposing new plans to create jobs.

Stocks rose after the report. The Standard & Poor's 500 Index climbed 1 per cent to 1,094.90 at 10.23am in New York. Treasuries dropped, pushing the yield on the benchmark 10-year note up to 3.68 per cent from 3.64 per cent late yesterday.

Private reports released on Thursday showed confidence among US consumers improved in January for a second month, and companies expanded this month at the fastest pace in more than four years as orders and employment increased.

The economy was forecast to grow at a 4.7 per cent annual pace, according to the median estimate of 84 economists in a Bloomberg News survey. Estimates ranged from gains of 3 per cent to 7.5 per cent.

Consumer spending, which comprises about 70 per cent of the economy, rose at a 2 per cent pace, more than anticipated following a 2.8 per cent increase in the previous three months. Economists projected a 1.8 per cent gain, according to the survey median.