U.S. Growth Hits Highest Level in Five Years

Growth hit 2.9% for the year, reversing the 2.6% contraction seen in 2009.

The U.S. economy grew at its fastest clip in five years in 2010, the Commerce Department reported on Jan. 28, as the country bounced back from recession and fears of a double-dip recession ebbed.

Growth hit 2.9% for the year, reversing the 2.6% contraction seen in 2009.

Releasing figures for the final quarter of what was a turbulent year for the world's largest economy, officials reported a late surge in consumer spending and an improving trade balance.

Consumer spending grew 4.4% in the last quarter, while growing exports and declining imports also served to boost growth.

The prospect of Americans spending, earning and exporting more boosted hopes that the jobless recovery may be coming to an end, despite the fact that the last quarter's growth of 3.2% missed economists expectations.

"The main concern is that growth could remain too weak to stimulate a sufficiently high rate of job creation to reduce stubbornly high unemployment, but today's GDP data at least take a step in the right direction," said Chris Williamson, chief economist with Markit.

"Talk of a jobless recovery may prove misplaced in 2011."

The figures appeared to signal a turning point for the economy, which for much of the year had struggled to escape the recession's orbit.

Throughout 2010 growth was driven by businesses rebuilding inventories that had been run down during the height of the crisis.

That process -- always assumed to be a temporary economic boost -- now appears to be coming to be coming to an end.

"Inventory building subtracted 3.7 percentage points (in the fourth quarter) after adding significantly to growth over the previous five quarters," said Zach Pandl of Nomura.

But economists were encouraged that spending and exports are picking up the slack.

"The bottom line is that we have a healthier mix of components heading into 2011," said Brian Jones of Societe Generale, citing "a much more favorable mix between final demand and inventories."

Copyright Agence France-Presse, 2011

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