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Economy Grows At 5.7 Percent Rate, Fastest Since '03

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The economy grew for a second straight quarter from October through December, posting a better-than-expected 5.7 percent annual rate, the fastest quarterly pace since 2003.

Friday's Commerce Department report is the strongest evidence to date that the worst recession since the 1930s ended last year, though an academic panel that dates recessions has yet to officially declare an end to it.

The two straight quarters of growth followed a record four quarters of decline. Still, the expansion in the fourth quarter was fueled by companies refilling depleted stockpiles, a trend that will eventually fade.

Growth exceeded expectations mainly because business spending on equipment and software jumped 13.3 percent — much more than forecast.

Economy Shrank 2.4 Percent Last Year

The report provided an upbeat end to an otherwise dismal year: The nation's economy declined 2.4 percent in 2009, the largest drop since 1946.

Still, economists expect growth to slow this year as companies finish restocking inventories and as government stimulus efforts fade. Many estimate the nation's gross domestic product will slow to a 3 percent rate in the current quarter and to about 2.5 percent for 2010.

About 60 percent of the fourth quarter's growth resulted from a sharp slowdown in the reduction of inventories as firms began to rebuild stockpiles depleted by the recession.

Excluding inventory changes, the economy would have grown at a 2.2 percent clip, the government said. That's an improvement from 1.5 percent in the third quarter.

Besides business spending on equipment and software, also powering growth in the October-December period was consumer spending, which rose 2 percent.

A steep increase in exports also helped boost growth. The shipment of goods overseas rose 18.1 percent, far outpacing a 10.5 percent rise in imports.

Government spending was actually a slight drag on growth in the fourth quarter: A small increase in federal spending was outweighed by a drop in state and local spending.

Wages, Benefits Up Record Low In 2009

A separate report showed that wages and benefits paid to U.S. workers posted a modest gain in the fourth quarter, ending a year in which recession-battered workers saw their compensation rise by the smallest amount on records going back more than a quarter-century.

The anemic gains have raised concerns about the durability of the economic recovery. The fear is that consumer spending, which accounts for 70 percent of economic activity, could falter if households don't have the income growth to support their spending.

The Labor Department said Friday that wages and benefits rose by 0.5 percent in the three months ending in December. For the entire year, wages and benefits were up 1.5 percent, the weakest showing on records that go back to 1982.

The 1.5 percent increase in total compensation in 2009 was about half the 2.6 percent increase in 2008 and both years represented the smallest gains for the government's Employment Compensation Index.

Last year, wages were up by just 1.5 percent and benefits rose by the same 1.5 percent, both record lows. In 2008, wages and salaries had been up 2.7 percent and benefits, which cover such things as health insurance and pension contributions, had risen by 2.2 percent.

This program aired on January 29, 2010. The audio for this program is not available.

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