Growth beats expectations as US jobless numbers fall
Published 26/03/2011 | 05:00
THE US economy grew at a 3.1pc annual rate in the fourth quarter, led by a jump in consumer spending that will be hard to match early in the year as energy prices surge.
The revised increase in gross domestic product compares with a 2.8pc estimate issued last month, figures from the Commerce Department showed yesterday in Washington. Earnings at financial firms led a 2.3pc increase in corporate profits from October to December that capped the biggest annual gain in six decades.
Surging oil prices sparked by turmoil in the Middle East may erode consumers' purchasing power, and supply constraints caused by the tragedy in Japan may slow the pace of recovery this quarter. At the same time, lean inventories and growing demand from emerging economies will probably keep benefiting companies like Caterpillar sustaining the expansion.
"The upward revisions are encouraging, though things are shaping up to be a bit of a disappointment this quarter," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania, who correctly forecast the gain in GDP.
"Consumer spending seems to be a little bit softer than we anticipated. We know we'll hit speed bumps, but the recovery will gather momentum through the year and into 2012."
Another report showed consumer sentiment this month declined more than forecast as surging fuel prices squeezed household budgets. The Thomson Reuters/University of Michigan final index of consumer sentiment for March fell to 67.5 from 77.5 in February, the group reported.
Unemployment decreased in 27 US states in February, suggesting a strengthening labour market.
The jobless rate fell the most in Nevada, where it reached 13.6pc, figures from the Labour Department showed yesterday in Washington. Thirty-five states showed gains in payrolls, led by California with a 96,500 increase and Pennsylvania where employment climbed by 23,700.
The report is consistent with March 4 government figures showing nationwide unemployment in February fell to 8.9pc as employers added 192,000 workers. Broader payroll gains are needed to bolster consumer spending, the biggest part of the US economy.
"The labour market recovery is starting to accelerate," Marisa Di Natale, an economist at Moody's Analytics. "We're going to see strong job growth but it's going to take a while to absorb everyone who wants a job."
Stocks rose as forecasts by technology companies like Oracle beat analysts' estimates. Treasury securities also gained, pushing the yield on the benchmark 10-year note down to 3.39pc compared with 3.41pc on Thursday.
GDP was projected to expand at a 3pc pace in the fourth-quarter, according to the median forecast in a Bloomberg News survey of 81 economists. Estimates ranged from 2.7pc to 3.4pc. The world's largest economy grew at a 2.6pc pace in the previous three months.
The economy expanded 2.9pc in 2010, the most in five years, after shrinking 2.6pc in 2009.