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Factory output spurs fastest US growth in four years -- experts

The US economy probably grew in the closing months of 2009 at the fastest pace in almost four years as factories stepped up production and companies bought new equipment, according to economists.

Gross domestic product (GDP) expanded at a rate of 4.6pc from October to December, more than double the prior quarter's growth rate and the strongest since the first three months of 2006, according to estimates by 74 economists. Other reports show orders for durable goods increased and home sales declined.

Sustained growth in the US could help improve the outlook for Ireland, as the country continues to grapple with the downturn. Last week, ESRI economist John FitzGerald predicted that Ireland's economy could be set for a 5pc annual growth spurt between 2012 and 2015 and predicted a "vigorous recovery".

US manufacturers such as chip-maker Intel are leading the recovery as growing demand and dwindling inventories prompt companies to speed up assembly lines.

Slower consumer spending in the US after the rebound associated with the third-quarter's 'cash for clunkers' car buyers' incentive scheme, is a reminder that 10pc unemployment is causing Americans to hold back, one reason why the Federal Reserve may keep interest rates low.


"Inventories are going to be responsible for at least half of the growth, if not more," said New York-based economist Joshua Shapiro.

"There's been an enormous amount of government stimulus that will be fading as we go through the year, so it's unclear how much the economy can do on its own."

Fed policy makers will do their part to spur growth by keeping borrowing costs near zero after their two-day meeting this week, economists predict.

Central bankers, who meet tomorrow and Wednesday, may reiterate their pledge to keep rates "exceptionally low" for "an extended period".

The US Commerce Department's first estimate of fourth-quarter GDP is due on Friday. The world's largest economy grew at a 2.2pc pace from July to September, the first gain in more than a year, after shrinking 3.8pc in the year to June.

Consumer spending, which accounts for about 70pc of the US economy, probably increased at a 1.8pc annual rate after rising at a 2.8pc rate in the previous three months, this week's GDP report is also projected to show.

Meanwhile, US senators Christopher Dodd and Judd Gregg said they were confident that Ben Bernanke would be confirmed to a second term as chairman of the Federal Reserve. Mr Bernanke's current term ends on Sunday.

Opponents of Mr Bernanke said the Fed failed to regulate banks prior to the credit crisis and criticised the Fed's involvement in the $182bn (€129bn) bailout of American International Group. (Bloomberg)

Irish Independent