The US economy picked up speed toward the end of 2010 as Americans spent more money at the fastest rate in four years and US companies sent more of their good overseas.
The growth in the final quarter of last year was a sign that 2011 could be a strong economic year, but remained too soft to point to any improvements to the unemployment rate.
The Commerce Department reported the economy grew by 3.2 percent during the October-to-December quarter of 2010. It was the best quarterly performance of the year and an improvement from 2.6 percent growth in the previous quarter.
For the entire 2010 year, the economy grew by 2.9 percent, the most annual increase since 2005 and a strong improvement since 2009 when the economy had its worst decline in more than six decades.
A major reason for the recent growth was strong consumers spending. Americans increased their spending by 4.4 percent during the quarter, the biggest increase sine 2006. Consumer spending accounts for about 70 percent of the entire economic outlook.
Economists predict consumer spending will continue to increase through 2011 by about 3.2 percent or more, nearly double the slow gains seen in 2010.
Economist said cuts in Social Security taxes, increased wages and higher stock prices should make people more willing to spend money.
Others warn that consumers are spending more than they are saving as they cut through their savings to keep up with the cost of inflation.In December 2010, the savings rate slipped to 5.8 percent from 2009’s rate of 5.9 percent. The figure is still above the low hit during 2005 of 1.4 percent when consumers spent more during the housing boom.
The economic growth is not enough to drive down unemployment, which stood at 9.4 percent in December 2010. Economic growth of about 3 percent is needed to keep pace with the nation’s growing workforce. Growth would need to be near 5 percent for an entire year for the unemployment rate to drop 1 percentage point, some economists estimate.