GDP Expanded 5.7% in Fourth Quarter

WASHINGTON (TheStreet) -- The U.S. economy expanded at its fastest clip in six years, the second consecutive quarter that GDP increased after ticking up to 2.2% in the third quarter.

In an advance read on gross domestic product, subject to two more revisions, the Commerce Department said economic growth accelerated to a seasonally adjusted 5.7% annual rate during the fourth quarter. The estimate far outpaced economist's forecasts calling for a 4.7% rise, according to a poll from Reuters. It also marked the economy's best effort since 2003.

The report showed that consumer spending increased by a 2% annual rate in the fourth quarter, slightly slower than the 2.8% increase signaled in the third quarter. The mark added 1.44 percentage points to the overall GDP change.

But an inventory swing was the primary driver in the stronger-than-expected overall showing. Inventories added 3.39 percentage points to GDP, reflecting a slimmer $33.5 billion depletion during the quarter. Businesses shed $139.2 billion from their inventories in the third quarter and $160.2 billion in the second. Because so much of the growth was chiefly attributed to restocking depleted shelves, many may question the sustainability of similar economic growth going forward.

Real final sales of domestic product, which offers a read on GDP less the change in inventories, increased 2.2% after registering a 1.5% increase in the third quarter.

Business spending increased 2.9%, while residential investment increased 5.7%.

The price index for gross domestic purchases, which highlights the prices paid by the nation's consumers, also increased by 2.1%. After stripping out potentially volatile food and energy prices, the index went higher by 1.2%.

The next fourth-quarter estimate is due on Feb. 26.

Stocks made gains on the news soon after the opening bell, as the Dow Jones Industrial Average added 74 points, or 0.7%, to 10,195.

-- Written by Sung Moss in New York

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