The U.S. economy surged in the fourth quarter to its fastest quarterly pace in six years. GDP numbers released today from the Commerce Department show an annual rate of 5.7 percent in the fourth quarter. Restocking of business inventories provided a major, though temporary, boost to growth in the fourth quarter, accounting for 59 percent of the increase in GDP in the final three months of the year.
While the inventory survey was expected, the big surprise today was on the trade front. Exports, which are mainly manufactured products, increased at an annual rate of 28-percent in the fourth quarter. This export rise in the fourth quarter was both the fastest and largest contribution to GDP growth in 30 years.
Outside the inventory swing and trade, the economy slowed moderately in the fourth quarter. Consumer spending weakened a bit in the wake of the “Cash for Clunkers” driven third quarter while business investment edged up moderately due to spending on information technology. With the labor market still deteriorating, and consumer confidence still down 50 percent from its level in mid 2007, the economy still faces significant headwinds.