U.S. Q4 Growth Revised Down to 5.6%

Corporate profits rose $109 billion due to cost-cutting and stronger demand.

The U.S. economy grew at a slower pace than previously thought in the fourth quarter as business and consumer spending slacked amid a fragile recovery from recession, the Commerce Department said on March 26.

The economy grew at 5.6% instead of the earlier estimate of 5.9%. The slower growth stemmed from downward revisions to business investment, inventories, and consumer spending, the department said.

Analysts had expected the world's largest economy to grow at 5.9% in the final quarter from 2.2% in the third quarter, maintaining a government estimate made last month.

Despite the second half growth, the U.S. economy contracted by 2.4% for the whole of 2009 compared to a 0.4% growth in 2008 -- the largest one-year contraction of the U.S. economy since 1938.

Corporate profits rose $109 billion in the fourth quarter due to cost-cutting and stronger demand by businesses as they grappled with a year of economic contraction.

The economy is expected to see annualized growth of around 2%-2.5% over the next few quarters, analysts at Moody's Economy.com said. This, plus the lift from a burst of temporary hiring by the Census Department, should be enough to lead to consistent job growth as the economy battled with nearly double digit unemployment, a thorn on the side of growth. "This, in turn, will boost consumer and business confidence, allowing the recovery to gain traction," said Augustine Faucher, director of macroeconomics for Moody's Economy.com.

Growth will improve toward the end of this year, and then accelerate throughout 2011, helping bring down the unemployment rate, which is expected to peak at 10.3% toward the end of this year from the current 9.7%.

Copyright Agence France-Presse, 2010

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