Economic growth revised up to 3.1%

Washington: The economy grew at an annual rate of 3.1 per cent in the final three months of last year, up from an earlier estimate, the Commerce Department said. The figure was roughly in line with economists' projections and the view that the recovery, while still moderate, picked up some steam at the end of last year.

Economic growth in the third quarter was 2.6 per cent and had been just 1.7 per cent in the second quarter. Overall, the nation's economic output, or gross domestic product, increased 2.9 per cent last year, a significant turnaround from 2009, when the economy shrank 2.6 per cent, the Commerce Department's Bureau of Economic Analysis said on Friday. It was the best annual growth for the economy since 2005. But turmoil in the Middle East, which has triggered higher fuel costs, and supply problems caused by the Japanese earthquake and tsunami loom.

"With gasoline prices north of $4 [Dh14.7] a gallon, there are yellow flags out there, and my guess is it will begin to spill over into consumer spending," said Gary Schlossberg, senior economist for Wells Capital Management in San Francisco. There was an indication of that Friday as consumer confidence plunged this month, according to the Thomson Reuters/University of Michigan Survey of Consumers.

Income increases

"The proximate cause of the sharp drop in confidence was the rise in gas and food prices," said Richard Curtin, chief economist for the survey. "The more damaging cause, however, was that the fewest consumers in more than a half-century expected income increases, and many fewer anticipated gains in their inflation-adjusted income," he said. Schlossberg projected growth in the first quarter would be above 3 per cent, but the effect of higher gas prices could slow growth in the second quarter.

Corporate profits rose in the fourth quarter to a record level of $1.68 trillion, up from $1.64 trillion in the previous quarter, the report said. The previous quarterly record was $1.66 trillion, set in 2006. But after-tax profits went down during the last three months of 2010, to $1.37 trillion from $1.42 trillion.

The government's final figure for fourth-quarter growth was up from an earlier estimate of 2.8 per cent and close to the original projection of 3.2 per cent. The stronger growth was spurred by increased consumer spending, business investments in items such as computers, and more exports, the report said.

— Los Angeles Times