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American economy soars

The US economy roared ahead in the final months of 2009, growing at its fastest rate in six years, as corporate America stopped slashing its inventories and again started to invest for the future.

world Updated: Jan 29, 2010 23:54 IST
Neil Irwin

The US economy roared ahead in the final months of 2009, growing at its fastest rate in six years, as corporate America stopped slashing its inventories and again started to invest for the future.

Gross domestic product, the broadest measure of economic activity, rose at a 5.7 per cent annual rate in the fourth quarter, the Commerce Department said. That is the highest pace of growth since 2003, and it constitutes proof that the recession reached its end earlier in 2009. It was also a surprisingly positive result, well above the 4.6 per cent rate of GDP growth forecasters had expected.

But there remained reason to doubt how strong the economic recovery will be in 2010. The biggest component of the GDP growth was a steep drop in the pace at which businesses were cutting back on their inventories. Firms reduced their inventories by $33.5 billion in the fourth quarter, compared with $139 billion in the third. In the math of GDP, which attempts to capture the value of goods and services produced within US borders, that added 3.4 percentage points to overall growth.

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