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GDP Revised Up to 5.9%

Gross domestic product's second reading for the fourth quarter topped expectations, rising at a 5.9% annual rate, according to a release from the Commerce Department.
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WASHINGTON (

TheStreet

) -- The economy expanded at a stronger pace in the fourth quarter than previously estimated, as inventory reductions ebbed more than first reported and exports picked up.

A revised reading on gross domestic product topped expectations, rising at a 5.9% annual rate during the fourth quarter, according to a release from the Commerce Department. In its advance figures released last month, the government said the economy expanded at a 5.7% clip.

The Street consensus had called for the revised estimate to hold steady at a 5.7% annual rate, according to figures provided by Briefing.com.

The stronger-than-expected GDP figure outpaced the 2.2% annual growth rate during the third quarter and the 0.7% contraction in the second quarter.

Businesses had wound down inventories for much of last year, but that pace slowed drastically during the fourth quarter. That accounted for much of the overall expansion. The change in inventories added 3.88 percentage points to the fourth-quarter GDP change, according to the report. In the third quarter, inventories added 0.69 percentage points.

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Exports surged 22.4% after rising 17.8% in the prior quarter.

But consumer spending rose less than originally thought, increasing only 1.7% during the quarter. Advance figures had originally estimated a 2% improvement. Consumer spending picked up 2.8% during the third quarter, and slid 0.9% in the second quarter.

The lack of pickup in consumer spending is particularly irksome in light of recent comments from

Federal Reserve

Chairman

Ben Bernanke. In his prepared testimony to the House Financial Services Committee on Wednesday, Bernanke said a "sustained recovery will depend on continued growth in private-sector final demand for goods services" as businesses work off inventories.

-- Written by Sung Moss in New York