Growth in the US economy improves

US economic growth continued to pick up speed in the final three months of 2010 as Americans spent at the fastest rate in four years and exports rose.

The US Bureau of Economic Analysis said GDP grew at an annualised rate of 3.2% between October and December, which was up on the annual rate of 2.6% in the previous quarter. The US economy grew by 2.9% in the whole of 2010, which is the strongest year of growth since 2005.

However, analysts said while growth in the US is too weak to ease its high unemployment rate, today's figures should boost hopes for a stronger 2011.

The figures come three days after shock data from the Office for National Statistics revealed that UK output went into reverse in the fourth quarter - declining 0.5% on a quarterly basis.

The US economy has consistently grown since a rough patch in spring last year. Growth in 2010 follows the US economy's worst decline in 60 years in 2009.

Increased consumer spending was a key reason the economy grew more strongly, as Americans boosted their spending at a 4.4% pace - the most since 2006. The data revealed they spent more on furnishings, appliances, cars and clothes.

Consumer spending accounts for roughly 70% of overall economic activity.

But the figures also revealed that imports shrank and exports grew, resulting in net trade contributing to 3.4% of GDP growth.

The dollar was strengthened by the data, up at 1.58 against the pound, although Wall Street's Dow Jones Industrial Average fell.

The growth will be welcomed at the Bank of England as international growth will be essential if the UK's fragile recovery is to stay on track.

Chris Williamson, chief economist at financial information services company Markit, said: "The acceleration of US GDP in the fourth quarter, and the changing composition of growth, raises hope that the economic recovery will move into a more self-sustaining phase in 2011 and generate sufficient jobs to reduce unemployment."

But he added: "The main concern is that growth could remain too weak to stimulate a sufficiently high rate of job creation to reduce stubbornly-high unemployment, but today's GDP data at least take a step in the right direction of raising hopes that talk of a jobless recovery may prove misplaced in 2011."