MercoPress. South Atlantic News Agency

US economy fourth quarter report positive, but still sluggish

The Federal Reserve says the US economy has strengthened “moderately”

The US economy grew at a faster than expected 0.4% in the fourth quarter of 2012, the Department of Commerce has said. The annualised figure was better than an earlier estimate of 0.1% growth, reflecting increased investments in plant and equipment.

However, despite the upwards revision, the department warned that the economy remained “sluggish”. The latest figures were a marked slowdown from the previous quarter.

An acute fall in defence spending and government expenditures hurt economic output, said the department.

“While non-residential fixed investment is higher than previously estimated, the revision to GDP has not changed the general picture of the economy,” said a statement.

The October-December figures came amid hopes that the US economic recovery is gathering steam, following a string of recent data showing rising home sales and an improving labour market.

BMO Capital Markets economist Jennifer Lee described the revised fourth quarter rate as “still disappointing”, but said that the investment bank was expecting US GDP to increase by 2.2% this year, the rate at which the economy grew last year.

In a report last week, the US Federal Reserve said that the economy had strengthened “moderately” but still needed stimulus measures to underpin recovery.

The Fed has said it would keep its policy of buying 85bn dollars a month of Treasury bonds and mortgage-backed securities in order to lower borrowing costs for households and businesses.

Although US joblessness has fallen, the Fed said it wanted to see signs of a long-term trend of falling unemployment.