By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) - The U.S. economy grew slightly faster than previously reported in the fourth quarter, the Commerce Department estimated Friday, but details of the revision to gross domestic product show final sales in the United States were actually weaker than reported a month ago.
U.S. real gross domestic product increased at a 5.9% seasonally adjusted annualized pace in the final three months of 2009, revised up from 5.7% estimated last month. The revision was exactly in line with expectations of economists surveyed by MarketWatch. Read our complete economic calendar.
The revisions "add further evidence that manufacturing remains the strongest sector in the economy, helped by global trade and the inventory cycle," said Anna Piretti, an economist for BNP Paribas.
In the third quarter, GDP rose at a 2.2% annual pace. GDP fell 6.4% in the first quarter of the year and 0.7% in the second quarter. Read the full report on the government's website.
Nearly two thirds of the growth in GDP in the fourth quarter was accounted for by changes in inventories, not by final sales. Businesses had been reducing their overstocks at the fastest pace in generations earlier in the year, and then sharply slowed the pace of reductions in the fourth quarter. The slowdown accounted for most of the fourth-quarter growth.
Although GDP grew at the fastest pace in six years, final demand in the economy was tepid, rising 1.9% annualized, revised down from 2.2% earlier. Excluding exports, final sales to U.S. purchasers rose at a 1.6% annual rate.
Even with healthy growth in the second half of the year, it was the worst year for GDP since the 10.9% drop in 1946, when the United States geared back to a peacetime economy. The economy shrank 2.4% in 2009 compared with 2008, the government said.
In 2009, business investment fell the most since 1942, while imports fell the most since 1946.
Fourth-quarter data
Compared with the first estimate of fourth-quarter GDP released a month ago, investments in inventories were higher, business investments were higher, exports were higher, and prices were lower. On the other hand, consumer spending was weaker, and government spending fell more.
Consumer spending increased at a 1.7% annual rate, down from 2.8% in the third quarter when the government's cash-for-clunkers program boosted auto sales.
Business investment grew at a 6.5% annual rate, the first increase since the spring of 2008. Investments in equipment and software increased at an 18.2% annual rate, but investments in structures plunged at a 13.9% pace.
The strong gain in capital spending is "consistent with our view that business investment will be a major factor propelling this recovery forward," said Merrill's Dutta.
Investments in homes increased at a 5% pace, the second straight increase after 14 consecutive quarters of falling investment.
Foreign trade added to growth as well, with exports of goods increasing at a 22.4% annual rate, the best in 13 years.
Direct government spending fell at a 1.2% annual rate.