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The U.S. economy grew at its fastest pace in 1-1/2 years in the fourth quarter of 2011, but a strong rebuilding of stocks by businesses and a slower pace of business spending hinted at softer growth early this year.
U.S. gross domestic product expanded at a 2.8 percent annual rate, the Commerce Department said on Friday, a sharp acceleration from the 1.8 percent clip of the prior three months and the quickest pace since the second quarter of 2010.
It was, however, a touch below economists expectations in a Reuters poll for a 3 percent rate, and two-thirds of rise in output was due to the build-up in business inventories.
Soft underlying demand and a sharp slowing in core inflation supported the Federal Reserve's decision to keep in place an ultra easy monetary policy to nurse the recovery.
"We do not expect growth to accelerate meaningfully from its current pace," said Michelle Girard, a senior economist at RBS in Stamford, Connecticut. She said Fed officials would focused on slack in the economy.
Stocks on Wall Street opened lower as investors worried about the composition of growth, while Treasury debt prices were little changed. The dollar fell against a basket of currencies.
INVENTORIES REBOUND
The economy in the fourth quarter got a temporary boost from the rebuilding of business inventories, which logged the biggest increase since the third quarter of 2010. The buildup followed a third quarter decline that was the first since late 2009.
Excluding inventories, the economy grew at a tepid 0.8 percent rate, a sharp step-down from the prior period's 3.2 percent pace and a sign of weak domestic demand.
The robust stock accumulation suggests the recovery will lose a step in early 2012 as businesses are unlikely to
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