Six straight quarters of GDP growth

According to the preliminary estimate from the BEA, the overall U.S. economy grew by 2.9 percent in year 2010 compared to the previous year. The 2.9 percent gains for 2010 were the strongest in the past four years. Following the start of the recession in 2007, GDP did not grow at all in 2008 and contracted by 2.6 percent in 2009. However, the 2010 GDP growth estimate is still weaker than the long term annual average growth (3.5 percent) over the period since 1950. Output has increased more slowly due to tight credit markets and other conditions affecting spending by business, consumers and state and local governments.

U.S. Gross Domestic Product (GDP) grew 3.2 percent in the fourth quarter (Q4) of 2010, compared to the previous quarter (see table). The Q4 increase was an improvement over Q3, when GDP grew 2.6 percent. Growth rates represent inflation-adjusted changes from the prior quarter, expressed at an annualized rate. The Q4 growth figure is an advance estimate from the U.S. Bureau of Economic Analysis (BEA) and will be revised later this month.

With the deepening of the global economic crisis in the second half of 2008, the U.S. economy shrank four consecutive quarters from the third quarter of 2008 through the second quarter of 2009. By the second half of 2009, however, the economy started to recover and the last quarter of 2010 marks the sixth consecutive quarter of positive growth.

Annual GDP gains strongest in four years

According to the preliminary estimate from the BEA, the overall U.S. economy grew by 2.9 percent in year 2010 compared to the previous year. The 2.9 percent gains for 2010 were the strongest in the past four years (see chart). Following the start of the recession in 2007, GDP did not grow at all in 2008 and contracted by 2.6 percent in 2009.

The preliminary 2010 GDP growth estimate is weaker than the long term annual average growth (3.5 percent) over the period since 1950. Output has increased more slowly due to tight credit markets and other conditions affecting spending by business, consumers and state and local governments.

Meanwhile, the U.S. economy is still operating below capacity. According to statistics released by the Federal Reserve, the capacity utilization rate for all industries was 76.0 percent in December. This is an increase over the low of 68.2 percent in the summer of 2009, but below the annual average of 81.3 percent recorded for 2007.