US growth hits 3.2% as British GDP contracts

A rise in domestic consumer spending helped America’s economy to expand at an annual rate of 3.2% in the fourth quarter of 2010. In Britain, by contrast, bad weather was partly blamed for GDP contracting 0.5% over the period.

Even the most pessimistic forecasts did not predict the rate of slowdown in British economic growth in the fourth quarter. Third-quarter growth was also revised down by the Office for National Statistics, from 0.8% to 0.7%.

At the end of last week economic data worsened for Britain, with research revealing that consumer confidence dropped to its lowest level in 22 months. (article continues below)

In America the picture was much different. According to the Bureau of Economic Analysis, consumer spending saw its biggest quarterly rise since the first quarter of 2006, increasing at an annual rate of 4.4% in the fourth quarter.

This jump partly explains the 3.2% quarterly rise in GDP, which was up on the 2.6% growth in the third quarter, although it was down on analyst forecasts of 3.5%.

Over the whole of 2010, American GDP rose 2.9%, after falling 2.6% in 2009.

Earlier in the week the International Monetary Fund (IMF), in its World Economic Outlook (WEO) update, revised its projections for global growth for 2011 upwards by a quarter point to 4.5%.

According to the IMF, this revision to its forecast reflected stronger than expected activity in the second half of 2010.

In last week’s projections the IMF revised its forecast for American growth in 2011, which had been released in its October WEO before the American GDP numbers for the fourth quarter, from 2.3% to 3%.

The IMF’s eurozone forecast stayed unchanged at 1.5% growth for 2011, while British growth was estimated to grow 2%, again an unchanged level from the October WEO.

Activity in advanced economies is projected to grow by 2.5% in 2011-12. In both years, growth in emerging and developing economies is expected to remain unchanged at 6.5%.

However, the fund warned of serious risks to global recovery, in particular the need to cope with difficulties in the eurozone and the developed world and overheating in emerging markets.