The US economy grew by 2.8 per cent during the final quarter of 2011, according to figures released by the US Department of Commerce. This is up from 1.8 per cent during the third quarter.
Data showed the world's largest economy grew at its fastest pace in nearly two years at the end of last year.
The figures were slightly below Wall Street predictions that the economy would have expanded at a 3 per cent annual rate during the final three months of the year.
"The increase in real GDP in the fourth quarter reflected positive contributions from private inventory investment, personal consumption expenditures (PCE), exports, residential fixed investment, and nonresidential fixed investment," according to the department.
But the benefits were offset by "negative contributions from federal government spending and state and local government spending" while imports increased.
Treasury Secretary Timothy Geithner told the World Economic Forum in Davos the U.S. economy still faced big challenges.
"We're still repairing the damage done by the financial crisis. On top of that we face a more challenging world. We have a lot of challenges ahead in the United States," Geithner said.
Marcus Bullus, trading director at MB Capital, commented: "First more jobs and now a resurgent economy: January has seen President Obama's undeclared re-election campaign make a dream start."
"The fourth quarter GDP figures may have undershot predictions. But any disappointment should be mitigated by one plain truth - they are the best evidence yet that the American economic giant is stirring from its slumber.
"All eyes will now turn to next week's non-farm payrolls to see if job creation is matching the growth," he continued. "Inflation remains the lingering threat to the revival of the US economy, and consumer confidence is still fragile."