Friday, January 29, 2010

U.S. economy likely to grow 4.6 pct

WASHINGTON : The U.S. economy likely grew at its fastest pace in nearly four years in the fourth quarter as businesses made less-aggressive cutbacks on inventories, a government report is expected to show on Friday.

A Reuters survey predicted that gross domestic product, which measures total goods and services output within U.S. borders, expanded at a 4.6 percent annual rate, up from 2.2 percent in the third quarter.

Analysts reckon the change in inventories could constitute as much as three-quarters of the GDP figure and overstate the strength of the recovery from the longest and deepest downturn since the Great Depression 70 years ago.

"We shouldn't dismiss it (GDP number), but the problem is the inventory cycle really doesn't last that long. It's not what we call self-sustaining growth," said Paul Ashworth, senior U.S. economist at Capital Economics in Toronto.

Getting the economy on a sustainable growth track remains one of the key challenges facing President Barack Obama, who on Wednesday outlined a raft of measures to create jobs and nurture the recovery.

The pace of inventory liquidation likely slowed in the fourth quarter, and some analysts believe inventories might even have been flat. Business inventories fell $139.2 billion in the July-September period after plunging by a record $160.2 billion in the second quarter.

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