Economy grew 3 percent in final quarter of 2011

Associated Press

WASHINGTON

The U.S. economy grew at an annual rate of 3 percent in the final three months of 2011, the best pace in a year and a half. But that growth likely has slowed in the current quarter.

Businesses have been restocking their shelves more slowly and shipping fewer long-lasting manufactured goods. In addition, Europe’s debt crisis and weaker growth in Asia have slowed demand for U.S. exports.

Stronger hiring in the first two months of the year probably hasn’t offset those weaknesses. That’s because Americans’ pay has barely kept pace with inflation even as gas prices have spiked. So consumer spending, which drives about 70 percent of economic activity, probably hasn’t increased much from the end of last year.

Most economists expect growth to pick up later this year as further hiring lifts the economy.

The Commerce Department reported no change Thursday in its previous growth estimate for the October-December quarter. The 3 percent annual rate was the strongest since the spring of 2010. Slower growth in exports than previously estimated was offset by stronger business investment.

Still, economists expect growth has probably slowed to 2 percent or less in the current January-March quarter.

A key reason for that is businesses haven’t been restocking their shelves as fast as they did at the end of last year. Many had slashed inventories over the summer out of fear that the economy was on the verge of another recession. When that didn’t happen, many stepped up restocking. Inventory building was a key driver of growth in the October-December quarter.