January 29, 2010 10:00 PM UTC

The United States chalked up impressive economic growth

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• by: Ray Springfield

The United States chalked up impressive economic growth of 5.7 percent at an annualized basis in the final three months of 2009, the Commerce Department reported Jan. 29. The growth is the fastest in six years.

Chart – US GDP

Most of the growth is related to inventories. The American economy is approximately 70 percent consumer fueled, so in recessions, retailers and wholesalers attempt to sell goods without replacing them, running down their inventories as a result. This stabilizes their finances, but all in all, it is a starvation diet. Eventually, they run out of goods and eventually, they need to place new orders. Those new orders stimulate production, particularly in manufacturing, and ultimately help boost employment. That appears to be what happened in the fourth quarter of 2009.

But the growth appears to be deeper than simply an inventory recovery. Of the 5.7 percent figure, only 3.4 percentage points originated from the inventory build. Net that out and growth was still 2.3 percent, a figure only slightly below the 20-year average of 2.6 percent. There are clearly other positive forces at work