2010 GDP Exceeds Estimates but Can 2011 Compete?

Brittney Barrett |

The U.S. economy grew at a more rapid pace in the fourth quarter than previously estimated with business spending maintaining itself and shelves being restocked to meet rising demand.

In February, there was some disappointment over a 2.8 percent report on an initial estimate of 3.2 percent. This month though, the gross domestic product growth was revised up to an annualized rate of 3.1 percent, according to a new report from the Commerce Department released Friday. The announcement also noted an increase in corporate profits of 3.3 percent after a 0.2 percent rise for the prior quarter.

The first quarter of 2011 is expected to be even stronger than the fourth quarter for 2010 but analysts remain concerned that the annual growth rate for the year may slip on rising commodities prices, particularly the sky rocketing oil prices, which have reach over $106 a barrel this week.

For the year economists had bright expectation for GDP growth, a measurement of total goods and services output in the U.S., predicting a pace of 3.0 percent. For the entirety of 2010, the economy grew 2.9 percent with corporate profits up 20.4 percent, the largest growth in 7 years.

Consumer spending is under seige right now making an annual 2011 GDP rate competitive with last year unlikely. If gas prices, which are expected to reach at high as $5 per gallon by the summer, continue to rise or maintain their exorbitant levels, Americans will spend more money at the pump and less money in stores or on vacations. Consumer spending accounts for two-thirds of total U.S. economic activity meaning a blow will sorely affect the GDP.

Current government predictions for the annual GDP have not been altered to reflect those concerns.

 

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