U.S. Economy: Growth Quickens, Propelled by Consumer Spending (Joe Richter)

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By Joe Richter

Jan. 31 (Bloomberg) -- The U.S. economy grew at the fastest pace in a year last quarter as declining energy costs helped power consumer spending and contain inflation, enhancing Federal Reserve Chairman Ben S. Bernanke's stature at the start of his second year.

Gross domestic product increased at an annual pace of 3.5 percent, the Commerce Department said in Washington today, more than forecast and up from a 2 percent pace in the prior three months. Other figures today showed manufacturing and construction still struggling to shake off a slowdown.

A consumer-spending spree during the holidays helped the economy overcome slumps in homebuilding and auto production that some economists said would derail the expansion. The Fed today is likely to keep its benchmark interest rate at 5.25 percent and signal no change in coming months.

``Bernanke's call and the Fed's call on the economy has been right,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts. ``They said the weakness would be temporary and that inflation would edge downward, and those have happened.''

Today's report is the government's first estimate of the quarter's gross domestic product, the value of all goods and services produced. The figures will be revised in each of the next two months.