GDP up 3.2 percent as economy accelerates

The economy grew at a rate of 3.2 percent in the fourth quarter of 2010, the highest number since the beginning of last year, the Commerce Department reported Friday.

The relatively high gross domestic product (GDP) number is an indication the economy is continuing to recover, driving hope that 2011 could be a year of further growth as the nation digs out from the recession.

President Obama needs strong growth to help lower the nation’s 9.4 percent unemployment rate, the most critical factor in his own reelection bid next year. 

The GDP figures should also affect the debate in Washington over spending. Republicans want to cut as much as $100 billion in planned spending for fiscal year 2011. President Obama proposed a five-year freeze on non-security discretionary spending on Tuesday. 

Some economists have warned that cutting spending could hamper economic growth and make it harder to create jobs, but Republicans argue the nation’s budget crisis makes the cuts imperative.

Friday’s numbers were the largest since the first quarter of 2010. In the third quarter of 2010, the GDP grew just 2.6 percent.

Real GDP grew at an overall rate of 2.9 percent during 2010, the first year of substantial economic growth since 2007. That number shrank 2.6 percent in 2009 when the economy was in the depths of the worst recession in decades, and was nearly flat in 2008.

The higher rate of growth at the end of 2010 was due largely to an increase in consumer spending, which was the largest of its kind since the first quarter of 2006. A significant boost in that sector is a good indication for the economy going forward, as it accounts for a majority of economic activity.

The federal government’s investment in the economy actually fell slightly in the fourth quarter, the first such decline since the beginning of 2010.

The department also reported that residential housing turned up slightly in the fourth quarter, a rare bit of good new for the housing market, which has continued to struggle while the rest of the economy has begun to recover. And net exports also were up during that time, indicating that exports were picking up while imports were decreasing.