Plus: U.S. Economy Accelerates, Consumer Confidence Improves and Durable Goods Demand Falls.

U.S. Economy Accelerated in Q4 2010
The United States economy accelerated in the fourth quarter of 2010, according to the U.S. Department of Commerce last week. Real gross domestic product (GDP) rose at a 3.2 percent annualized rate, up from a 2.6 percent rate in the third quarter.

The growth rate fell short of the 3.5 percent median forecast of economists surveyed by Bloomberg News due to a slowdown in inventories, but because of the slightly speedier expansion, the nation’s overall economic output has finally matched its pre-recession peak.

The big story for the last quarter of the year was the pickup in consumer spending.

“Consumer spending grew at an annual rate of 4.4 percent in the October-December period, its quickest pace in nearly five years and almost double the growth rate from the previous quarter,” the New York Times explains. “Thanks to modestly higher paychecks and swelled investment portfolios, Americans appeared more comfortable buying again and stashing away a little less in savings.”

The recently passed payroll tax cut and extension of the Bush-era tax cuts are “expected to further buoy consumer spending, which many economists predict will grow at an annual pace of about 3 percent or 3.5 percent this year,” the Times notes.

For the year, GDP advanced 2.9 percent, compared with a 2.6 percent drop in 2009. This is the strongest growth rate in five years. Still, given the millions of jobless American workers, the economy has fallen far short of what it could be if it were healthy, according to economists.

Consumer Confidence Improves in January
Americans are more optimistic about employment conditions and the overall economy this month, boosting U.S. consumer confidence to its highest level since May 2010 and improving the prospects for a stronger economic recovery this year.

The Conference Board’s latest consumer confidence index rose to 60.6 in January, up from 53.3 in December. Consumers’ views of current conditions were generally more positive, with 9.8 percent saying business conditions are “good,” up from 7.7 percent last month, while those claiming business conditions are “bad” remained unchanged at 40.4 percent. Those who claimed jobs are “plentiful” also rose from 4.2 percent to 5.2 percent, while those who said jobs are “hard to get” fell from 46 percent to 43.4 percent.

“Consumers have begun the year in better spirits. As a result, the Index is now near levels not seen since last spring,” Lynn Franco, director of The Conference Board Consumer Research Center, said in an announcement of the findings. “Consumers rated business and labor market conditions more favorably and expressed greater confidence that the economy will continue to expand and generate more jobs in the months ahead. Income expectations are also more positive. Although pessimists still outnumber optimists, the gap has narrowed.”

The short-term outlook also experienced a boost in January. The number of consumers expecting an improvement in business conditions over the next six months rose from 16.8 percent to 19 percent, while those expecting business conditions to worsen fell from 11.8 percent to 11.3 percent. The proportion of consumers expecting an increase in their income over the next six months rose from 9.9 percent to 11.4 percent.

“This is definitely a good way to start 2011,” the Atlantic explains. “If consumer confidence continues to grow, then so should spending. As firms sense stronger demand, hiring should finally start to grow at a brisker pace.”

Durable Goods Orders Fell in December
Orders for big-ticket products in the U.S. declined sharply in December, with new orders for the nation’s manufactured durable goods falling 2.5 percent to $191 billion, significantly worse than the 0.1 percent revised drop in November, according to the U.S. Department of Commerce last week. Economists polled by MarketWatch had expected a 1 percent rise in orders for the month.

“[T]he December report presented evidence of slowing in both U.S. business investment and manufacturing activity,” Manufacturers Alliance/MAPI economist Cliff Waldman wrote in an analysis of the Commerce Dept. report. “Excluding the production of defense equipment, new orders were down by 2.5 percent, more than twice the decline seen in November. Demand in primary and fabricated metals, key early supply chain industries, experienced significant declines, albeit from strong activity in November. Machinery demand, however, closed out 2010 on a strong note.”

Transportation equipment, down four of the last five months, had the steepest decline, falling 12.8 percent to $39.2 billion mostly due to a drop in orders for non-defense aircraft and parts, which fell $5 billion in December. Minus the transportation sector, orders actually rose 0.5 percent, led by a 10.6 percent rise in machinery demand and a 3.6 percent increase in communications equipment.

“The global economic recovery continues to be a positive for U.S. factory sector prospects. But world growth is imbalanced with strong activity in emerging market nations providing a stark contrast to the weak and uncertain rebound in the advanced economies, a pattern that may well persist for an extended period of time,” Waldman added. “All told, 2011 should be year of solid but slower output gains in U.S. manufacturing, as growth in capital spending and export demand, the two key drivers of industrial activity, moderate.”

Pirates Took Record Number of Hostages in 2010
Pirates captured a record 1,181 hostages in 2010, almost all of them off the Somali coast, and killed eight, the International Maritime Bureau (IMB) recently reported. According to the global maritime watchdog, attackers seized 53 vessels worldwide last year, all but four of which were taken by Somali pirates.

Hijackings off the coast of Somalia accounted for 92 percent of all ship seizures last year, with 49 vessels hijacked and 1,016 crew members taken hostage, according to the IMB.

“These figures for the number of hostages and vessels taken are the highest we have ever seen,” Captain Pottengal Mukundan, director of the IMB’s piracy reporting center in Kuala Lumpur, which has monitored piracy worldwide since 1991, said in a statement. “The continued increase in these numbers is alarming.”

The number of pirate attacks against ships has risen every year for the last four years, the IMB says. Ships reported 445 attacks in 2010, up 10 percent from 2009.

While attacks off the coast of Somalia remain high, the number of incidents in the Gulf of Aden more than halved last year, with 53 attacks in 2010, down from 117 in 2009. The IMB attributes the fall to the presence of warships and more crews using recommended management practices, the Associated Press notes.