Jump in GDP to 3.2% and improved Ford figures raise US hopes of stronger 2011

Confidence in the United States economy grew yesterday as it emerged that GDP had picked up in the closing months of 2010 while car-maker Ford posted its best profit in more than a decade.

Official figures showed that economic growth rose to an annual rate of 3.2 per cent in the three months to the end of December - up from 2.6 per cent in the previous quarter.

For all of last year the economy grew 2.9 per cent, the strongest outcome since 2005 and a marked turnaround from 2009, when the US suffered its worst decline in more than 60 years.

The growth is boosting hopes for an even stronger 2011, although it remains too weak to ease high unemployment.

Centre for Economics and Business Research economist Owen James said: "Despite the improvement, the recovery still appears a long way from absorbing the spare capacity in the labour market. The Federal Reserve will look to cultivate and nurture these 'green shoots'."

The US unemployment rate stood at 9.4 per cent in December. It takes about 3 per cent growth just to create enough jobs to keep pace with the population increase. By some estimates, growth would have to be closer to 5 per cent for a full year to drive down the unemployment rate by 1 percentage point.

The government will have taken encouragement from a pick-up in consumer spending, which rose at its sharpest pace since 2006. Americans spent more on furnishings, cars and clothes.

Ford generated its biggest profit in 11 years in 2010 as robust car and pick-up sales and years of cost-cutting paid off for the group. It reported a profit of $6.6 billion (4.1bn), compared with $2.7bn the year before. Four years ago, Ford posted a string of huge losses and its future was in doubt.

Chief financial officer Lewis Booth said the company fell short in the final quarter from October to December because its costs rose more than analysts expected.