The U.S. economy expanded at a
quicker pace in the previous quarter than earlier estimate, and was
expected to gain momentum this year, but the U.S. central bank chief
cautioned that the recovery still faced a set of challenges.
The growth rate of the real gross domestic product (GDP) was the
best one since the second quarter of 2010. The world's largest
economy has expanded by 10 consecutive months by the end of last
year.
The growth rate in the fourth quarter was also an acceleration
from the 1.8 percent growth pace in the third quarter last year.
The acceleration of the economic growth in the fourth quarter
primarily reflected an upturn in private inventory investment as
well as accelerations in personal consumption expenditures and in
residential fixed investment.
However, the 1.7 percent economic growth pace last year was far
from the 3 percent registered in 2010, and was not robust enough to
make a significant dent in the nation's high unemployment hovering
at 8.3 percent.
Speaking in a testimony before the Committee on Financial
Services of U.S. House of Representatives on Wednesday, U.S. Federal
Reserve Chairman Ben Bernanke cautioned that the world's largest
economy was still confronted with lingering challenges despite
improvement on several fronts including the manufacturing sector and
consumer spending.
"The recovery of the U.S. economy continues, but the pace of
expansion has been uneven and modest by historical standards,"
Bernanke said in the Fed's Semiannual Monetary Policy Report to
lawmakers.
Looking beyond 2012, participants of the Federal Open Market
Committee (FOMC), the Fed's monetary policy making body, predicted
that U.S. economic activity will expand at a tepid pace in coming
quarters supported by a continuation of the highly accommodative
monetary policy, but the unemployment rate would edge down "only
slowly," added Bernanke.
"The fundamentals that support spending continue to be weak: Real
household income and wealth were flat in 2011, and access to credit
remained restricted for many potential borrowers. Consumer
sentiment, which dropped sharply last summer, has since rebounded
but remains relatively low," Bernanke noted.
The central bank chief stopped short of signaling the third round
of bond purchases, dubbed third round of quantitative easing (QE3),
to inject new liquidity into the economy to shore up the capital
markets and housing sector.
U.S. stocks gave up its earlier gains buoyed by the second batch
of long-term refinancing operation of the European Central Bank
(ECB) to close lower Wednesday on Bernanke's cautious remarks.
Minutes of the latest FOMC meeting released earlier this month
showed that Fed officials were willing to open the monetary
floodgate only if the economic prospects deteriorate.
The U.S. recovery appeared to be gaining traction with stronger
manufacturing and construction sectors, but it was "premature" to
conclude that the troubles were over, Moody's Analytics chief
economist Mark Zandi wrote in a recent blog article.
"The U.S. foreclosure crisis continues to pull house prices
lower, adding pressure on stretched homeowners, on small businesses
looking for credit, and on local governments struggling to fund
schools and other important services," Zandi contended.
To rev up the slow economic expansion in the election year, U.S.
President Barack Obama hosted a working lunch with congressional
leaders Wednesday to find potential areas of cooperation including
new moves to bolster economic growth and job creation, a rare case
of bipartisanship.
