US fourth quarter GDP falls short of expectations, but exceeds Q3 figures

The US economy ended last year on a firmer footing with modestly stronger growth. However, output fell short of what analysts expected, and signs point to weakness ahead.

Gross domestic product (GDP) was up 2.8 per cent in the fourth quarter as consumers bought more cars and other goods, according to the commerce department. This was less than the 3 per cent projected by many analysts, but was above the 1.8 per cent the earlier quarter.

However, the faster growth had more to do with businesses increasing their stockpiles of products rather than from sales of goods and services, which reflected actual demand.

A big build-up of inventories in one quarter often meant manufacturers and other companies would buy fewer supplies in the months following, unless there were surprise bulk order requests from consumers and others.

However, according to analysts, at the present juncture, there was no reason to expect a surge in demand from businesses, consumers or government. According to the commerce department's Friday report, sharp cuts in public spending worked as a significant drag on the economy.

Also, job growth was hardly robust, and the housing market remained depressed. Further fiscal efforts were doomed by political gridlock and Europe's debt woes and China's slowdown threatened the global economy.