THE US economic recovery is speeding up, with consumption growing at its fastest rate in five years during the last quarter of 2010.
The overall economy grew at a seasonally adjusted, annualised rate of 3.2 per cent in the fourth quarter, with personal consumption up 4.4 per cent, according to preliminary figures released by the Bureau of Economic Analysis.
Total growth was slightly below the market’s expectations of a 3.5 per cent rise but a robust increase in consumption, exports and investment raised hopes that the private sector will be able to lead a sustained expansion in 2011.
“It’s not a stellar number, but the composition is far more sustainable than we’ve seen through the recovery so far,” said David Semmens, US economist at Standard Chartered in New York.
Consumption picked up even before a temporary cut to payroll taxes kicked in at the start of 2011, said Mr Semmens.
“Consumers in particular showed signs of emerging from their funk, finding it easier to free up dollars for spending,” said Jim Baird, chief investment strategist for Plante Moran Financial Advisors.
Bart van Ark, chief economist of The Conference Board, however argued that the consumer spending burst was “bargain-induced” and that growth will slow down in the first half of 2011 as state and local governments pull back spending and business investment in inventories decelerates.
Other economists noted part of the consumption increase was fuelled by a fall in the savings rate from 5.9 per cent to 5.4 per cent.
The markets initially rose on the GDP figures, with the Dow Jones and the S&P 500 reaching the technically significant numbers of 12,000 and 1,300 respectively in early trading, before falling back. – (Copyright The Financial Times Limited 2011)
