GDP Grew At 5.7% Pace In Q4, Best In Six Years and Q4 GDP Rose 5.7%, Best In Six Years And Above Views

A smaller inventory drop accounted for 3.4 percentage points of Q4’s growth. But consumer spending, about 70% of U.S. economic activity, rose 2%. That’s down from Q3’s cash-for-clunkers-fueled pace but better than expected.

Business investment in equipment and software grew 13.3%, the best gain in nearly four years. Overall business investment rose 2.9%.

Residential investment stepped up 5.7%. The question is whether housing will remain strong after the homebuyer credit finally ends this spring and the Federal Reserve is no longer buying mortgage securities.

Solid growth should continue in early 2010, most economists expect. But after government stimulus and inventory restocking ebbs, there’s a fear that private-sector demand won’t be enough to deliver more than tepid economic growth, especially as fiscal and monetary stimulus becomes a major drag. Unemployment is expected to remain stubbornly high. [Read the full article]

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Improvement in inventories, strong business investment and decent consumer spending paced the second straight GDP increase after a record four quarters of contraction. But when government stimulus ebbs and inventories normalize, there’s a fear that private-sector demand won’t be enough to deliver more than tepid economic growth.

“It’s nice to have climbed out” from the deep recession, said Richard DeKaser, chief economist at Woodley Park Research. But, he added, “it’s not a growth pace we should expect to continue.”

Stocks popped on the upbeat GDP report but fell back on concerns about future tech spending. The Nasdaq fell 1.5%, the S&P 500 1% and the Dow 0.5%.

“The fact that 3.4 percentage points of growth came from inventories means that we’re unlikely to see the same pace of growth in the near term,” said Gus Faucher, director of macroeconomics at Moody’s Economy.com. He forecasts 2% growth in the first half.

Consumer spending, about 70% of U.S. [Read the full article]

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