Reuters reported that the US economy grew a touch more than initially thought in the fourth quarter, but a surprise drop in January home sales to a 7 month low and weaker consumer confidence underscored headwinds facing the recovery.

The Commerce Department said that US gross domestic product expanded at a 5.9% annual rate, instead of the 5.7% pace estimated last month.

Separate reports showed that sales of previously owned homes dropped sharply in January, while growing impatience about efforts to stimulate employment led to a dip in consumer sentiment this month, boding ill for consumer spending.

Mr Mike Englund, chief economist at Action Economics in Boulder, said that "The GDP bounce has yet to translate to rising consumer and business confidence, and this would seem to be an important transition mechanism for allowing the inventory bounce to translate to sustained growth."

The economy rebounded strongly in the second half of 2009 from the worst downturn since the 1930s, but data so far, including home sales, suggest the rapid rate of acceleration has started to slow this year. Economists cautioned that severe winter weather across much of the country will distort data on employment, housing and retail sales and hurt growth this quarter.

The National Association of Realtors said that sales of existing homes dropped 7.2% to an annual rate of 5.05 million units last month, the lowest since June 2009.

Economists attributed much of the decline to payback from a tax credit related surge in the second half of 2009, although they said bad weather also likely played a role.

(Sourced from www.reuters.com)