30th Jan 12
US economy sees fourth quarter growth increase
by Katie Naylor
The American dream: US economy improves but still has a way to go
The American dream: US economy improves but still has a way to go
The speed f the US economy growth picked up in the fourth quarter of last year, official figures showed.
The economy expanded at an annualised rate of 2.8 per cent, said the Commerce Department. This was an increase on the annual rate of 1.8 per cent reported in the previous quarter, but it was marginally lower than the rate of three per cent which analysts had predicted.
However, the growth came largely from business stockpiling products, instead of selling them. Even though the stockpiling raised the figures, analysts are of the opinion that businesses will not keep doing this, leading to a lower growth rate for this quarter.
Meanwhile, the pace of consumer spending increased from 1.7 per cent during the previous quarter to two per cent. Much of this was put down to sales of new cars picking up, with a reported increase of 14.8 per cent during the quarter. The Japanese earthquake and tsunami last March affected production and delivery of vehicles for major manufacturers, resulting in customers having to wait for pre-ordered cars.
US Treasury Secretary Timothy Geithner pointed out that it was worth noting that the economy is continuing its recovery from the global recession in 2008. He said it should be remembered that the country is still faced with tremendous challenges and must continue to repair the damage caused as a result of the devastating financial crisis which still has massive lasting impacts on the fortunes of many Americans.
He said that the construction and housing sectors were still weak, the jobless rate remained a massive challenge and that people still possessed too much debt. He went on to say that a reasonable expectation for the US economy in 2012 would be for it to grow by between two and three per cent.
Mr Geithner explained that the growth rate depended on two key factors – what happens in Europe and the Middle East, which determines the price of oil, and whether or not Republicans in Congress opt t legislate things which are good for short-term growth.
Analysts warned that the fourth quarter headline growth figure did not reveal the whole story. Markit’s chief economist Chris Williamson said that the gross domestic product (GDP) report by the Commerce Department confirms the speed of growth which had been suggested by a raft upbeat business surveys and economic indicators over recent weeks, but also shows that the economy is not as healthy as the headline growth rate might suggest.
RBC Capital’s senior currency strategist David Watt said that the figures were not that encouraging but they wouldn’t affect the Fed. He explained that the recent economic numbers are being downplayed which is consistent with the view of the Fed that the US economy will need as much help as it can get.
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