Economy Grew Modest 2.8% in Q4, Best in 2011

Economy growthWASHINGTON (AP) - The U.S. economy grew at a 2.8 percent annual rate in the final three months of last year, the fastest growth in 2011.

Americans spent more on cars and trucks, and companies restocked their shelves at the strongest pace in nearly two years. But growth in the October-December quarter - and all of last year - was held back by the biggest annual government spending cuts in four decades.

The Commerce Department said Friday that the economy grew just 1.7 percent last year, roughly half of the growth in 2010 and the worst since the recession.

Most economists expect businesses to ease up on restocking in the first three months of the year. That should slow first-quarter growth. And consumers may cut back on spending if their wages continue to lag inflation.

In the final three months of last year, consumer spending grew at a 2 percent annual rate. That's up modestly from the third quarter.

Much of the growth was powered by a 14.8 percent surge in sales of autos and other long-lasting manufactured goods.

Incomes, which have been weak all year because of high unemployment, grew at a modest 0.8 percent annual rate. That followed two straight quarters of declining incomes.

Consumer spending is important because it makes up 70 percent of economic activity.

Business restocking, which can vary widely from quarter to quarter, was the greatest contributor to growth in the October-December period. It added nearly 2 percentage points to the gross domestic product, or GDP.

Government spending at all levels fell at an annual rate of 4.6 percent in the fourth quarter and 2.1 percent for the year - the biggest decline since 1971. Sweeping federal defense cuts at the beginning and end of 2011 were a major factor.

The economy is measured by GDP, which covers everything from haircuts to hotel bookings to jet fighter planes. Friday's estimate was the first of three for the fourth quarter.

Paul Ashworth, an economist at Capital Economics, said growth is likely to slow in the first three months of this year to below 2 percent. That's largely because businesses will ease up on restocking.

"Overall, the pickup in growth doesn't look half as good when you realize that most of it was due to inventory accumulation," Ashworth said.

But not all economists agree that the first quarter of this year will be weak.

Ian Shepherdson, an economist at High Frequency Economics, said business investment in capital goods should be stronger, consumer spending firmer and government activity less of a drag.

Other data show the economy ended 2011 on a strong note. Companies invested more in equipment and machinery in December. The unemployment rate fell to 8.5 percent last month - the lowest level in nearly three years - after the sixth straight month of solid hiring.

People are buying more cars, and consumer confidence is rising. Even the depressed housing market has shown enough improvement to make some economists predict a turnaround has begun.

Still, many economists worry that a recession in Europe could dampen demand for U.S. manufactured goods, which would slow growth. And without more jobs and better pay, consumer spending is likely to stagnate.

The Federal Reserve signaled this week that a full recovery could take at least three more years. In response, it said it would probably not increase its benchmark interest rate until late 2014 at the earliest - a year and a half later than it had previously said.

The central bank also slightly reduced its outlook for growth this year, from as much as 2.9 percent forecast in November down to 2.7 percent. The Fed sees unemployment falling as low as 8.2 percent this year.

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Mike

Same OLD, tired, libtard, LIE! Always with the single digit growth. Real inflation is over 15% and rising. This means we spent more to get LESS! That’s called CONTRACTION to all non kool aid libtards. Got gold?

January 31 2012 at 1:44 PM Report abuse rate up rate down Reply
Jetncat

you can have the best 100K laborers on the face of the earth ready to plant but if you don't have the seeds YOU HAVE NOTHING..... Employers are the seed creators without them your fields are without growing plants and laborers are not needed to harvest because there is nothing to harvest...

January 30 2012 at 12:05 PM Report abuse +2 rate up rate down Reply
Jetncat

ONE GIANT JOKE AMERICA!!!!! Get this clown out of office before it is too late and our destruction can not be reversed!
November can't come quick enough, hopefully it won't be too late as he spends another 2 Trillion dollars!

January 30 2012 at 11:54 AM Report abuse +1 rate up rate down Reply
Mike

MOFKR
Mike, that is absolutely asinine, no matter how many times you paste it. Employers do not produce the products. They OWN the PLANT and equipment, and the workers produce the product. End of story.-----------------------------------------------------------------------------------------------------------------------------------------------------------------THEY DO OWN THE PLANT! If you had EVER studied economics 101 you would have learned that the three factors of production ( that means the 3 things it takes to produce anything ) are Land, labor, & capitol. Hence by definition if ALL 3 factors are not present then there is NO production, no producing can be done! ONLY those that bring ALL 3 factors are producers. Labor does NOT bring LAND ( plant ) or the CAPITOL. BY DEFINITION WORKERS ARE NOT PRODUCERS THEY ARE WORKERS PAID FOR BY PRODUCERS. A worker is only worth what is costs to replace them either with another worker or automation. That is the PRICE of labor is subject to the two ( only two) factors of PRICE supply & demand. Thank you for such a clear example of libtard absolute ignorance to fundamental principles of economics. This is why most libtards have been displaced (fired) from employ. Got gold?

January 30 2012 at 10:31 AM Report abuse rate up rate down Reply
1 reply to Mike's comment
Jetncat

before you have the plant you need to have the seed. Who planted the seed to start the plant? EMPLOYERS DO!

January 30 2012 at 11:55 AM Report abuse rate up rate down Reply
Mike

Tehran Pushes to Ditch the US Dollar

India and Iran are negotiating deal to trade oil for gold. Does this matter, you ask? It strikes at both the value of the US dollar and today's high-tension standoff with Iran.

Officially the US & EU is Tehran must be punished for efforts to develop a nuclear weapon. Sanctions on Iran's oil exports meant to isolate Iran and depress the value of its currency to a point that the country crumbles.

Sanctions will not achieve their goals. Iran is far from isolated and its friends - like India - will stand by the oil-producing nation until the US backs down or acknowledges the real matter the American dollar as the global reserve currency.

In the 1970s a deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on oil trade with the US dollar as the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar's value up. Countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit.

If the US dollar loses its position as the global reserve currency, the consequences for America are dire. The dollar's valuation stems from its lock on the oil industry - if that monopoly fades, so too will the value of the dollar. Global fiat currency relationships will change. Gold will rise. Uncertainty around paper money always bodes well for gold, and these are uncertain days indeed.

GOT GOLD?

January 30 2012 at 10:30 AM Report abuse rate up rate down Reply
gopispoison666

Some thinking human beings ask those "very nice" GOPers in Congress to please stop their vicious class war against American workers.

http://www.youtube.com/watch?feature=player_embedded&v=RQ_Q-IkCTWM

January 30 2012 at 10:21 AM Report abuse -1 rate up rate down Reply
1 reply to gopispoison666's comment
Jetncat

YOU HAVE THA BAKCWARDS... It is the Democrats and Barak Obama who started the class war rich against everyone else. The rich didn't start this war Barak Obama did!

January 30 2012 at 11:56 AM Report abuse +1 rate up rate down Reply
janswizz

Welcome to the Daily Finance Spam site.

January 30 2012 at 9:04 AM Report abuse +2 rate up rate down Reply
Mike

Same OLD, tired, libtard, LIE! Always with the single digit growth. Real inflation is over 15% and rising. This means we spent more to get LESS! That’s called CONTRACTION to all non kool aid libtards!

January 29 2012 at 9:00 PM Report abuse rate up rate down Reply
Ed Perkins

There is nothing modest about 2.8 percent growth. It is excellent performance Has the entire jounalist world decided to rely on the negative rhetoric of Fox News. Everything good is discounted or dismissed.

January 29 2012 at 7:21 PM Report abuse -1 rate up rate down Reply
1 reply to Ed Perkins's comment
bggdg

Sorry, Ed.

From the end of WWI through 2010, the average annual US GDP growth rate was 3.3%.

I'd say 2.8% qualifies as "modest".

How does it feel to be dumber than Fox News?

January 29 2012 at 7:53 PM Report abuse -1 rate up rate down Reply
Mike

Tehran Pushes to Ditch the US Dollar

India and Iran are negotiating deal to trade oil for gold. Does this matter, you ask? It strikes at both the value of the US dollar and today's high-tension standoff with Iran.

Officially the US & EU is Tehran must be punished for efforts to develop a nuclear weapon. Sanctions on Iran's oil exports meant to isolate Iran and depress the value of its currency to a point that the country crumbles.

Sanctions will not achieve their goals. Iran is far from isolated and its friends - like India - will stand by the oil-producing nation until the US backs down or acknowledges the real matter the American dollar as the global reserve currency.

In the 1970s a deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on oil trade with the US dollar as the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar's value up. Countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit.

If the US dollar loses its position as the global reserve currency, the consequences for America are dire. The dollar's valuation stems from its lock on the oil industry - if that monopoly fades, so too will the value of the dollar. Global fiat currency relationships will change. Gold will rise. Uncertainty around paper money always bodes well for gold, and these are uncertain days indeed.

GOT GOLD?

January 29 2012 at 5:56 PM Report abuse +1 rate up rate down Reply