GDP Revised Down to 5.6% From 5.9%

WASHINGTON (TheStreet) -- The economy expanded at its fastest pace in years in the fourth quarter, according to the government, helped by upticks in corporate spending and slower inventory reductions, among other things.

In its third and final read on the nation's gross domestic product released Friday, the Commerce Department said the economy grew at a 5.6% annual rate last quarter.

The government provides three separate estimates on quarterly GDP. In its first reading released in January, GDP reportedly rose 5.7% in the fourth quarter. That figure was revised up to 5.9% in last month's revisions, only to be amended down in this final reading. Consensus forecasts had called for growth to remain unchanged in the last revision at 5.9%, according to Briefing.com.

During the third quarter, GDP rose 2.2%. For all of 2009, the economy contracted at a 2.4% annual pace.

According to the government's assessment, when compared to the previous estimate, this final reading reflects downward changes to business spending, inventories and consumer spending.

The grand bulk of the economic expansion resulted from inventory adjustments. Businesses wound down inventories for much of last year, but that pace slowed immensely during the fourth quarter. According to the report, businesses slashed inventories by $139.2 billion in the third quarter and $160.2 billion in the second. But in the fourth, inventories decreased by only $19.7 billion. The change in inventories added 3.79 percentage points to the fourth-quarter GDP rise, according to the report, though that was revised down from the 3.88 percentage points estimated in the previous reading. In the third quarter, inventories added 0.69 percentage points.

Corporate spending jumped 5.3% in the fourth quarter, according to the report, after retreating 5.9% in the previous quarter. Still, in its last estimate, the government said business spending increased 6.5% in the fourth.

Exports surged 22.8% after rising 17.8% in the third quarter.

But consumer spending rose less than originally thought, increasing only 1.6% during the quarter. The previous estimate reported a 1.7% improvement. Consumer spending picked up 2.8% during the third quarter, and slid 0.9% in the second quarter.

-- Written by Sung Moss in New York

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