Better GDP figures

The gross domestic product figures released Friday confirmed the Federal Reserve Board's assessment that the economy is recovering, albeit more slowly than everyone would like.

The Commerce Department reported that GDP grew at an annual rate of 2.8 percent in the fourth quarter of 2011, a faster pace than the 1.8 percent increase in the third quarter and far removed from economists' fears of a double dip recession last summer.

But the growth was driven mostly by companies restocking their inventories, not by consumer demand, which accounts of 70 percent of the economy. Those backlogs are considered auguries of solid growth in coming quarters.

But with Americans reluctant to buy, U.S. firms are selling more overseas, a record $2 trillion in goods and services, which, at 14 percent of GDP, is the largest share since 1929.

Government spending cuts at all levels are a drag on GDP, but investments in home construction and repairs rose 10.9 percent in the last quarter and orders for durable goods exceeded economists' expectations by rising 3 percent in the quarter.

While there are grounds for optimism about the continued recovery, Europe's financial troubles could be a damper especially if the continent falls back into recession. The Europeans remain divided over whether to press austerity measures, necessitated by Greece's flirtation with defaulting on its debt, or to rely on stimulus to revive growth.

Hanging fire in Washington is renewal of the payroll tax cut, which Congress late last year temporarily extended to February. Failure to continue it would cost American workers about $1,000 a year and likely shave a percentage point off GDP.

To boost the recovery further, Congress needs to end its impasse over the payroll tax cut.