The US 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 government said Friday.
The world's largest economy grew by 5.6 percent in the October-December period, the Commerce Department said, revising downward an earlier estimate of 5.9 percent growth in gross domestic product -- the key output benchmark.
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 percent in the final quarter from 2.2 percent in the third quarter, maintaining a government estimate made last month.
The US economy started growing only in the second half of last year after plunging into a brutal recession in December 2007 triggered by a home mortgage meltdown that sparked a global financial crisis
Despite the second half growth, the US economy contracted by 2.4 percent for the whole of 2009 compared to a 0.4 percent growth in 2008 -- the largest one-year contraction of the US economy since 1938.
In the final quarter, the government revised downwards non-residential fixed investment, private investment in inventories, and personal consumption expenditures.
Corporate profits rose 109 billion dollars in the fourth quarter due to cost-cutting and stronger demand by businesses as they grappled with a year of economic contraction, the data Friday showed.
Analysts expect economic growth to slow in the near term but with the recovery continuing and then picking up in the second half of 2010.
The economy is expected to see annualized growth of around 2.0-2.5 percent 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, they said.
"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 percent toward the end of this year from the current 9.7 percent.
