Economy expanded 5.7 percent in 4Q, the fastest in past 6 years

U.S. broadest measure of economic activity, gross domestic product, expanded at an annual rate of 5.7 percent in the fourth quarter, after a 2.2 percent increase the previous quarter. The growth rate was the fastest since the third quarter of 2003, when the economy grew at a rate of 6.9 percent.

Even though the fourth-quarter surge, the economy finished 2009 with its biggest contraction since 1946, when the country was still cooling off from World War II.

The single biggest factor in the strong growth rate last quarter was not consumers buying more, but businesses letting their stockpiles shrink at a slower rate than they had been previously.

As long as the labor market remains weak, consumers will be reluctant to spend money. That means businesses will need to look for other sources of demand, like exports. On net, the economy lost 208,000 nonfarm payroll jobs last quarter, and the unemployment rate rose to 10 percent, from 9.7 percent.

The nation’s output number can be subject to major revisions, especially when the economy is at a turning point. The annual growth rate initially reported by the government for the third quarter of 2009 was 3.5 percent, but was later revised to 2.2 percent. The government’s final tally of last quarter’s output will be released in March.

Meager rise in December, U.S. inflation under control

Inflation appears to be largely in check even as interest rates in the United States remain near zero and the government pumps billions into the economy. The consumer price index (CPI), a broad gauge of inflation, increased 0.1 percent in December, down from a 0.4 percent advance in November. This is the lowest rate since July.

The core CPI, which excludes food and energy costs, also rose 0.1 percent, a tick more than the unchanged reading in November.

By the end of 2009, prices had jumped 2.7 percent from the previous year. The core CPI rose 1.8 percent in 2009, the same rate as the prior year.

The meager rise in the CPI means Federal Reserve policy makers will probably keep interest rates at their historic lows for the immediate future.

Many economists believe inflation will not emerge as a threat for some time because of the large amount of excess capacity, high unemployment, and weak housing market.

Across the country, machines sit idle or are running at reduced capacity at many factories. A separate report released Friday said utilization reached 72 percent, the highest level in a year. Yet that remained far below the historic average of 80.9.

U.S. stocks ended first trading week of 2010 higher

U.S. stocks finished the first trading week of the year on a high note, with the major indexes all turning higher late in Friday's session. A disappointing employment report had weighed on stocks throughout the Friday.

The Dow Jones Industrial Average rose to 10,618.19, giving it a weekly rise of 1.8 percent, while the S&P 500 climbed to 1,144.98, up 2.7 percent for the week. The small cap index, Russell 2000 advanced to 644.69, progress 1.46 percent for the week, and the tech-focused Nasdaq Composite Index climbed to 2,317.17, a level that has it 2.1 percent ahead for the week.

This first week result failed to support the widely known January effect anomaly. While the large cap stock index, S&P 5000, was up 2.7 percent; the small cap index, Russell 2000 advanced only 1.46 percent.

U.S. Job Losses in December temper optimism for a swift recovery

U.S. economy shed 85,000 jobs in December and the unemployment rate held steady at 10 percent, tempering hopes for a swift and sustained recovery from the Great Recession.

The monthly figures from the Labor Department included a revision for November that showed a gain of 4,000 jobs, in contrast to initial reports showing a loss of 11,000 jobs. That was the first monthly improvement since the recession began two years ago.

During 2009, payrolls fell by 4.2 million. Since the recession began two years ago, payrolls have fallen by 7.3 million.