US growth hits highest level in five years

Growth hit 2.9 percent for the year, reversing the 2.6 percent contraction seen in 2009.

Releasing figures for the end of what was a turbulent year for the world's largest economy, officials reported a late surge in consumer spending and an improving trade balance that pumped growth up to 3.2 percent in the last quarter.

Consumer spending grew 4.4 percent over the final three months of the year, while exports rose 8.5 percent.

The White House lauded a "sixth straight quarter of positive growth."

'Economy gains momentum'

President Barack Obama's top economic adviser Austan Goolsbee said it was "a further sign that the economy continues to gain momentum as it recovers from the worst recession since the Great Depression."

"We are on the right path, but have a lot more work to do to accelerate growth so that we are creating the jobs we need."

The prospect of Americans spending, earning and exporting more boosted economists' hopes that the jobless recovery may be coming to an end, despite the fact that the last quarter's growth of 3.2 percent missed their expectations.

"The main concern is that growth could remain too weak to stimulate a sufficiently high rate of job creation to reduce stubbornly high unemployment, but today's GDP data at least take a step in the right direction," said Chris Williamson, chief economist with Markit.

"Talk of a jobless recovery may prove misplaced in 2011."

Turning point for economy

The figures appeared to signal a turning point for the economy, which for much of the year had struggled to escape the recession's orbit.

Throughout 2010 growth was driven by businesses rebuilding inventories that had been run down during the height of the crisis.

That process -- always assumed to be a temporary economic boost -- now appears to be coming to be coming to an end.

"Inventory building subtracted 3.7 percentage points (in the fourth quarter) after adding significantly to growth over the previous five quarters," said Zach Pandl of Nomura.

But economists were encouraged that spending and exports are picking up the slack.

"The bottom line is that we have a healthier mix of components heading into 2011," said Brian Jones of Societe Generale, citing "a much more favorable mix between final demand and inventories."

The White House said it would continue to try and encourage that mix.

Goolsbee said the administration would focus on helping businesses "to invest and hire here at home, investing in education and infrastructure, and promoting exports abroad."

Republicans claim credit

Republicans meanwhile claimed some credit for the rise in growth, after taking control of the House of Representatives earlier this year.

"This uptick is no doubt due in part to the certainty that Washington has given the private sector through the recent tax deal and the newly elected House Republican majority," the office of House majority leader Eric Cantor said in a statement.