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February 28, 2012

US Economy Grows Faster Than First Thought

The U.S. economy grew a bit faster than first thought in the last few months of 2011, as incomes grew and businesses started hiring more workers.  

The Commerce Department said Wednesday the nation's overall economic output expanded at a 3 percent annual rate in the October-to-December period, its fastest growth in a year-and-a-half. The government originally pegged the fourth quarter growth at 2.8 percent.

But that 3 percent pace may not continue.

The chairman of the country's central bank, Ben Bernanke, told a congressional committee that the government's financial forecasters predict the American economy, the world's largest, will advance by 2.25 percent this year, about the same pace as it did in the last half of 2011.

"The recovery of the U.S. economy continues, but the pace of expansion has been uneven and modest by historical standards," he said.

About 13 million U.S. workers remain unemployed. The nation's jobless rate, 8.3 percent in January, has declined for five straight months, but by historical standards remains at a high rate. Bernanke said the economy will have to improve even more before the unemployment rate drops further.

"The decline in the unemployment rate over the past year has been somewhat more rapid than might have been expected, given that the economy appears to have been growing during that time frame at or below its longer-term trend;  continued improvement in the job market is likely to require stronger growth in final demand and production," he said. "Notwithstanding the better recent data, the job market remains far from normal: The unemployment rate remains elevated, long-term unemployment is still near record levels, and the number of persons working part time for economic reasons is very high."

A nation's gross domestic product sums up all the goods and services produced in a country, everything from new jet planes, to haircuts, to the services of a lawyer.

Wednesday's report is the latest in a flurry of mostly upbeat data about the U.S. economy expanding at a modest pace as it recovers from the worst economic downturn since the Great Depression in the 1930s.

However, the rising cost of gasoline may slow economic growth in the first quarter of this year.

Bernanke said higher global oil prices could push up inflation temporarily while reducing consumer spending.  In the United States, consumer spending is watched closely because it accounts for about 70 percent of the country's economic activity.

Some information for this report was provided by AFP and Reuters.