U.S. economy revised upward to 5.9 percent in fourth quarter

21:53, February 26, 2010      

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The U.S. economy increased at an annual rate of 5.9 percent in the fourth quarter of 2009, much faster than initially thought, according to the revised estimate released by the Commerce Department on Friday.

The second reading for the October-to-December quarter was 0.2 percentage point stronger than the 5.7 percent growth rate estimated on January 29.

The increase, the best showing since 2003, is also better than economists' expectation of a flat reading.

In the third quarter, the U.S. economy increased 2.2 percent. The two straight quarters of growth last year followed a record four quarters of economic decline

The U.S. government usually releases three estimates of the real gross domestic product (GDP) -- the output of goods and services produced by labor and property located in the United States.

The acceleration in the U.S. economy in the fourth quarter primarily reflected an acceleration in private inventory investment, an upturn in nonresidential fixed investment, a deceleration in imports, and an acceleration in exports, according to the Commerce Department.

The change in real private inventories added 3.88 percentage points to the fourth-quarter change in real GDP, after adding 0.69 percentage point to the third-quarter change.

Private businesses decreased inventories 16.9 billion dollars in the fourth quarter, instead of 33.5 billion dollars estimated last month. The retreat followed decreases of 139.2 billion dollars in the third quarter and 160.2 billion dollars in the second.

Stripping out inventories, the economy expanded at an annual rate of 1.9 percent, rather than the 2.2 percent pace estimated last month, indicating growth was not being driven by demand.

In the final three months of 2009, consumer spending, which accounts for two thirds of overall economic activity, rose at an annual rate of 1.7 percent due to the economic stimulus package, compared with an increase of 2.8 percent in the third.

It added 1.23 percentage points to the fourth quarter change in real GDP.

"Consumers have been getting more impatient with the slow progress of the stimulus program, and confidence in the Obama administration's economic policies has begun to wane," Richard Curtin, director of the surveys, said in a statement.

Exports of goods and services surged 22.4 percent in the fourth quarter, compared with an increase of 17.8 percent in the third. Meanwhile, imports of goods and services increased 15.3 percent, compared with an increase of 21.3 percent.

The sharp gain in the fourth quarter is another sign that the U. S. economy has pulled out of the deepest downturn since the Great Depression in 1930s.

However, the recovery is widely perceived as fragile.

"The fourth quarter GDP revision tastes great, but is less filling," said Robert Dye, senior economist of PNC Financial Services Group. "We need the meat and potatoes of private-sector job creation in order to sustain this recovery."

Federal Reserve Chairman Ben Bernanke testified to Congress this week that the central bank will need to keep interest rate low in order to support the economy.

Meanwhile, the National Association of Realtors reported on Friday that existing-home sales in the United States fell by 7.2 percent in January.

"The latest monthly sales decline is not encouraging, and raises concern about the strength of a recovery," said Lawrence Yun, NAR chief economist in a statement.

Source: Xinhua
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