Washington: The surge in US economic growth in the fourth quarter depended on more than manufacturing and investment. Households also played their part.

Gross domestic product grew at a 5.7 per cent annual rate from October through December, more than anticipated and the strongest performance since the third quarter of 2003, figures from the Commerce Department showed on Friday.

Consumer spending rose at a two per cent pace after increasing 2.8 per cent the previous three months, reflecting a slowdown in auto sales.

Spending cooled after the government's cash-for-clunkers plan expired in August, ending rebates on trade-ins of older vehicles. Excluding autos, consumer spending increased at a 3 per cent rate last quarter, the most in three years, indicating the biggest part of the economy was gaining speed.

"There was some genuine pickup in momentum over the second half of last year that was slightly obscured by ‘cash for clunkers'," said Samuel Coffin, an economist at UBS Securities in Stamford, Connecticut. "There will be no huge venting of pent-up demand, but continued momentum" in spending.

Better times

The increase is being fuelled by growing incomes rather than a decrease in savings, signalling household purchases can keep expanding in coming months. Amazon.com is among companies projecting better times ahead as the world's largest economy emerges from the recession.

Economists anticipated the economy would expand at a 4.8 per cent pace in the last three months of 2009, according to the median of 84 estimates in a Bloomberg News survey. Consumer spending, which accounts for about 70 per cent of the economy, was projected to grow at a 1.8 per cent pace.

For all of 2009, the economy shrank 2.4 per cent, the worst single-year performance since 1946. Household purchases dropped 0.6 per cent last year, the biggest decrease since 1974.

Spending excluding autos picked up from a 1.6 percent gain in the third quarter and a 0.7 per cent drop in the previous three months, according to Bloomberg News calculations.

Wages grow

The Commerce Department report showed pay for those still employed grew. Incomes rose at a 4 per cent pace in the last three months of 2009, the most since the second quarter of 2008. Wages and salaries climbed 2.2 per cent, the best performance in two years.

Amazon.com said on Thursday that sales may rise as much as 43 per cent in the first quarter compared with the same time last year, beating analysts' estimates.

Stocks dropped on Friday, depressed by disappointing results at technology companies including Microsoft. The Standard & Poor's 500 Index fell 1 per cent to close at a two- month low of 1,073.87.

Efforts to rebuild inventories and gains in business spending on new equipment provided the biggest boosts to growth last quarter, the report showed.

Stockpiles dropped at a $33.5 billion annual pace following a $139.2 billion decline the previous three months. Inventories declined at a record $160.2 billion pace in the second quarter. The smaller slide added 3.4 percentage points to GDP.

Purchases of equipment and software increased at a 13 per cent pace in the fourth quarter, the most since 2006, the report showed. The gain helped offset a 15 per cent drop in commercial construction, leaving total business investment up 2.9 per cent over the past three months.

"We are getting on to something that is pretty sustainable," said Bruce Kasman, chief economist at JPMorgan Chase & Co in New York.