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The US economy roared back to life with a 5.7 percent growth pace in the fourth quarter, led by brisk business spending that offset sluggish consumer activity, official data showed Friday.
The Commerce Department report on gross domestic product (GDP) showed the strongest growth in six years.
The figures showed growth accelerated from the 2.2 percent annualized pace in the third quarter, when the economy expanded for the first time after four quarters of contraction and the deepest recession in decades.
Even with the rebound, gross domestic product contracted by 2.4 percent for the full year 2009, the worst performance since 1946, due to the collapse in economic activity in the early part of the year.
Still, the robust growth in the October-December quarter was the best since 2003 and significantly better than the 4.7 percent pace expected by analysts.
"This suggests pretty good momentum heading into the first quarter," said Sal Guatieri, economist at BMO Capital Markets. "It suggests the recovery is gaining legs."
President Barack Obama said the GDP data "affirms our progress and the swift and aggressive actions that made it possible," arguing that his economic policies have staved off the threat of a second Great Depression.
But Obama noted that although the economy was growing, a swift rise in job creation was lacking, meaning initiatives like the new hiring incentive were needed, as he unveiled a 33-billion-dollar job creation effort.
The big GDP gains came in large part from businesses ramping up production to rebuild inventories, which economists say may skew the picture of overall activity but is a normal part of recovery. Inventories accounted for 3.39 percentage points of GDP.
Stripping out inventory adjustment, real final sales -- a reflection of the underlying pace of growth -- was at a 2.2 percent rate, the report showed.
GDP, or the output of all goods and services in the economy, was an annualized 14.46 trillion dollars based on the fourth-quarter data.
"GDP is certainly not as strong as it looks," said Scott Brown, chief economist at Raymond James & Associates.
"Underlying domestic demand was pretty soft, positive but moderate... We're not seeing a sharp V-shaped recovery."
Augustine Faucher at Moody's Economy.com said the report offered a mixed picture.
"With so much of the expansion coming from inventories, it remains to be seen if the economy can maintain strong growth in the quarters ahead, and the labor market remains a worry," he said.
"Growth will weaken in the first half of 2010, before accelerating in the second half of this year and into next."
Other factors helping fourth-quarter GDP included auto production, which accounted for 0.61 percentage points of the total. A slowing pace of imports also boosted the growth rate.
Capital spending on equipment and software surged 13.3 percent, another significant contributor. Ian Shepherdson at High Frequency Economics called this a "key upside surprise" but added that "we can't see where this comes from and think a downward revision is likely."
The data showed exports surged 18.1 percent, making trade a positive contributor to GDP since exports increased more than imports, which were up 10.5 percent.
Consumer spending, which is traditionally the key driver of economic activity, rose at a 2.0 percent pace, down from 2.8 percent in the third quarter, and accounted for 1.44 percentage points of GDP.
Economists say the key to a more sustainable pace of growth will be a rebound in consumer spending, which accounts for around two thirds of economic activity.
Many have argued that the underlying pace of expansion may be too weak to help bring down unemployment, currently at 10 percent.
But Dean Maki at Barclays Capital said the report showed the economy appears to be moving toward a more sustainable growth trend.
"We view this improvement in business fixed-investment spending as a clear signal that a self-sustaining recovery is underway, as businesses are feeling confident enough to spend more," he said. "We think this confidence will translate soon into steady job growth."
