Data from the US Department of Commerce reflected a rapid increase in the US economy during the fourth quarter of 2010 more than what was previously expected. However, softer consumer and business spending may slow down its momentum in the early part of this year.

Analysts attributed the expected slow down in growth to the rising cost of oil as well as the political situation in the Middle East and North Africa. Economists say that the slowing down of the economy will only be temporary. Secretary of Treasury Timothy Geitner believes that the destructive earthquake and tsunami in Japan will not have a huge impact on US economy.

The Thomson Reuters/University of Michigan consumer sentiment index decreased to 67.5 this month, its lowest level since November 2009, from 68.2 in the first part of March and 77.5 in February.  Expected inflation during the next twelve months remained constant from the preliminary. A survey conducted in March revealed that consumers still expected prices to increase.

Economists expected the GDP to grow at a 3 percent pace. During the third quarter of 2010, the economy grew by 2.6 percent. For the whole year of 2010, the growth was 2.9 percent. The fourth quarter increase indicated stronger business inventory accumulation and spending. Data showed a $16.2 billion increase in business inventories, higher than the $7.1 billion expected in February 2011.

Most businesses are expected to have stepped up their efforts in refilling their shelves in the opening quarter, with inventories expected to contribute positively to economic growth.  Business investments increased through spending on equipment and software and on structures. Oracle, the third largest software manufacturer in the world, predicts solid sales in the first quarter of 2011.

The Department of Commerce also reported growth in corporate profits. During the fourth quarter of 2010, corporate profits increased 3.3 percent after registering a 0.2 percent increase during the previous quarter. Economists say that solid profits can fuel increased hiring. For 2010, corporate profits registered its highest increase since 2004 at 20.4 percent.

On the other hand, consumer spending increased by 4 percent in the fourth quarter. The figure was the highest increase registered since in four years and is higher than the 2.4 percent growth rate during the third quarter. Consumer spending represents over two-thirds of US economy.

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