core sector communique

U.S. Economy Grew More than Expected in 2011

By MacKenzie C. Babb

Staff Writer

Washington - The U.S. economy expanded more from October to December 2011 than originally reported, according to a revised estimate from the Commerce Department.

"Real gross domestic product - the output of goods and services produced by labor and property located in the United States - increased at an annual rate of 3.0 percent in the fourth quarter of 2011," the department's Bureau of Economic Analysis said in a February 29 report. The rate of growth was up 0.2 percentage points, or $7.5 billion, from a January 2012 advance estimate of 2.8 percent for the three-month period. The figure was revised based on the gathering of more complete data.

The report said the increase in gross domestic product (GDP), the leading indicator of a nation's economic health, reflected positive contributions from private inventory investment, personal consumption expenditures, exports and construction. These gains were partly offset by a drop in federal, state and local government spending as well as by an increase in imports, which are a subtraction in calculating the GDP.

The economy grew at a rate of 1.7 percent for the whole of 2011 after an increase of 3 percent during 2010. The deceleration reflected downturns in private inventory investment and federal government spending and a slowing in export growth. These were partly offset by slowing in import growth and acceleration in business-related construction.

Federal Reserve Chairman Ben Bernanke said annual growth for 2011 was low due to slow growth during the first half of the year, but the GDP grew at a rate of more than 2 percent in the second half.

"The limited information available for 2012 is consistent with growth proceeding, in coming quarters, at a pace close to or somewhat above the pace that was registered during the second half of last year," Bernanke testified before the U.S. House of Representatives' Committee on Financial Services February 29.

He said that in a meeting earlier in 2012, the Federal Open Market Committee (FOMC), the central bank's policymaking arm, projected growth for the year will fall between 2.2 percent and 2.7 percent. The projection falls considerably below the group's previous forecast for 2012, which they made in June 2011. Bernanke said this drop in expected growth was due to several factors, including continued problems in the U.S. housing market, fiscal strain in Europe and slow global economic growth.

"Looking beyond 2012, FOMC participants expect that economic activity will pick up gradually as these headwinds fade," Bernanke said. He added that the committee will try to maintain low interest rates as it continues to closely monitor the economic climate and adjust policies as necessary to promote the U.S. economic recovery.

(This is a product of the Bureau of International Information Programs, U.S. Department of State.)