US economy grows 5.7% in last quarter - Fastest pace in six years

The United States economy grew at a faster-than-expected pace at the end of last year, fuelled by companies boosting output to keep stockpiles up.

The 5.7 per cent annual growth rate in the fourth quarter was the fastest pace since 2003.

It marked two straight quarters of growth after four quarters of decline.

Growth exceeded expectations mainly because business spending on equipment and software jumped much more than forecast.

Still, economists expect growth to slow this year as companies finish restocking inventories and as government stimulus efforts fade.

Many estimate the nation's gross domestic product will grow 2.5 per cent to three per cent in the current quarter, and about 2.5 per cent or less for the full year.

That will not be fast enough to significantly reduce the unemployment rate, now at 10 per cent. Most analysts expect the rate to keep rising for several months and remain close to 10 per cent through the end of the year.

With hiring still weak, President Barack Obama has stepped up his focus on job creation. On Friday, he urged Congress to embrace his call for tax incentives to create jobs.

Obama wants to give companies a US$5,000 tax credit for each net new worker they hire in 2010. Also, businesses that increase wages or hours for existing workers in 2010 would be reimbursed for the extra Social Security payroll taxes they would pay.

"It's time to put America back to work," the president told workers at the Chesapeake Machine Company in Baltimore.

But he acknowledged that "while these proposals will create jobs all across America, we've got a long way to go to make up for the millions of jobs that we lost in this recession."

About 60 per cent of the fourth quarter's growth resulted from a sharp slowdown in the reduction of inventories as firms began to rebuild stockpiles depleted by the recession.

fourth-quarter growth

Changes to inventories added 3.4 percentage points to the fourth-quarter growth, the Commerce Department said in its report Friday. Excluding inventories, the economy would have grown at a 2.2 per cent clip, the government said. That is an improvement from 1.5 per cent in the third quarter.

Consumer spending rose two per cent, down from a 2.8 per cent rise in the third quarter. It added 1.4 percentage points to GDP growth.

A steep increase in exports also helped boost growth last quarter. The shipment of goods overseas rose 18.1 percent, far outpacing a 10.5 per cent rise in imports. Net exports added 0.5 percentage points to GDP.

Government spending was actually a slight drag on growth in the fourth quarter: A small increase in federal spending was outweighed by a drop in state and local spending.

-AP