The US economy accelerated sharply in the fourth quarter of 2011, expanding at an annual rate of 2.8%, just as growth in Europe grinds to a halt.

The Thomson Reuters/University of Michigan consumer sentiment index for the end of January rose to 75 from a preliminary reading of 74 for the month and 69.9 at the end of December. The latest reading was better than the 74.5 expected by economists. 

Official figures showed that GDP expanded by around 0.7% quarter-on-quarter in the last three months, a slightly weaker performance than investors had expected. Although there are some signs that the strong growth might not be sustained, as almost 2% of the 2.8% GDP growth was accounted for by firms rebuilding their stocks of goods, a factor that is likely to be temporary.

Consumers are also dipping into their savings to maintain spending, with: the savings ratio declining to 3.7%, its lowest level since the end of 2007. In 2011 as a whole, the US economy expanded by 1.7%, compared with 3% in 2010.

Orders for durable goods, items which last over 3 years, in the US rose 3% in December 2011, according to official figures from the Commerce Department. Including transportation equipment, orders rose by $6.2bn to $214.5bn, the fifth rise in the past six months and follow a 4.3% rise in November.

Strong orders for aircraft boosted the figures but even without transport goods, new orders still rose 2.1%. US consumers thought the economy was doing a bit better in January, according to data released on Friday.

However like the UK sales of new homes in the United States fell in December, closing the worst year on record, the Commerce Department reported on Thursday. Only 302,000 new houses were sold during the year, the lowest level in records dating to 1963, as foreclosures, high unemployment and tight mortgage lending kept buyers away following the bursting of the housing price bubble in 2006.

Although the decline in new-home sales came in contrast to a sharp rise in sales of previously occupied homes in December, the third month of gains in the much bigger sector of the housing market. 

Fed officials are still remaining cautious though and lowered their growth expectations for this year, a shock for many who had become more confident in the outlook for the US economy. But there again economists do hate to be wrong (even though they often are).