U.S. economy shows strong growth in Q4

The U.S. economy unfolded more actively in the fourth quarter than analysts might have expected. However, domestic demand grew at the slowest pace in 2.5 years, reflecting the impact of higher credit costs.

Gross domestic product rose 2.9% year over year last quarter. Economic growth in the third quarter was 3.2%. Experts polled by Reuters had forecast GDP growth of 2.6%.

The U.S. Commerce Department released a preliminary report Thursday on fourth-quarter GDP. The fresh data showed that the rebound was driven in part by a surge in factories’ inventories.

While consumer spending maintained a solid growth rate, most of the increase in consumption came at the beginning of the fourth quarter. Retail sales fell sharply in November and December. Business spending on equipment declined last quarter and is likely to remain low due to lower demand for goods.