The U.S. economy, propelled by the biggest surge in consumer spending on big-ticket goods in 15 years, grew at a much faster rate than initially thought during the fourth quarter of 2001 and logged the strongest quarterly gain for the year.
Gross domestic product, the broadest gauge of the economy's health, expanded at a revised 1.4 percent rate in the final three months of last year, seven times the 0.2 percent pace first estimated, the Commerce Department said. The sharp revision supports Federal Reserve Chairman Alan Greenspan's contention made Wednesday that the U.S. recession was ending.
Economists in a Reuters poll expected GDP to grow by 0.8 percent during the quarter. Even though the economy has been officially in recession since last March, the downturn has been unusually mild by historical standards. The only negative quarter for GDP occurred in the third quarter, when it contracted 1.3 percent.
A jump in government spending and a rush by consumers to take advantage of zero-percent financing for purchases of new cars powered the fourth-quarter GDP. And amid the strong consumer spending, companies ran through $120.0 billion worth of inventories.
"I think the reality is that we just finished the mildest recession that we've ever had, but we may have something of a mild recovery as well," said Carl Tannenbaum, chief economist at LaSalle Bank/ABN AMRO.
GDP during all of 2001 grew at 1.2 percent, ahead of initial estimates of 1.1 percent growth but still the weakest performance since a 0.5 percent decline in 1991 in the midst of the nation's last recession.
Analysts say the enormous depletion of inventories strengthens their conviction that an economic recovery is at hand, as companies will need to step up production to replace the goods that have been flying off store shelves and showroom floors, fueling GDP growth in future quarters.
Consumer spending grew at a 6.0 percent rate during the fourth quarter, the largest increase since a 6.2 percent rise in the second quarter of 1998. But analysts warn that consumer spending, which has been the key underpinning of the soft economy, could slip as confidence erodes and as the job market remains weak.
Additionally, there was ample evidence in the GDP report that the business sector is still weak.
Business spending on new plants and equipment plunged 13.1 percent, a bigger decrease than the 12.8 percent decline first estimated and the fourth straight quarterly decline.
Spending on durable goods skyrocketed 39.2 percent, the biggest jump in more than 15 years.
Meanwhile, government spending grew 10.1 percent in the fourth quarter, up from the 9.2 percent rate first estimated and also the biggest rise since an 11.1 percent gain in the second quarter of 1978.
Reuters and the Associated Press contributed to this report.