U.S. economy grew at the fastest pace in a year and a half in the fourth quarter of 2011. The encouraging acceleration ended the year with a positive note, but failed to dispel uncertainties about the economic outlook.

Gross domestic product, the value of all goods and services produced, increased at an annual rate of 2.8 percent in the fourth quarter, the Commerce Department said in its preliminary report Friday. It is a considerable increase from the revised 1.8 percent in the third quarter, but still fell short of the economists' wide expectation of 3 percent.

The weaker-than-forecast growth dampened sentiment of the market as stocks opened lower on Friday.

Economy in the fourth quarter mainly got a boost from stronger personal consumption and an upturn in business inventory and residential fixed investment.

Personal consumption expenditures, which account for more than two-thirds of the U.S. economy, rose 2 percent in the fourth quarter, up from a 1.7 percent pace in the third quarter.

Real residential fixed investment increased 10.9 percent, much faster than the 1.3 percent in the previous quarter, pointing to a rebound in home construction market. It came in contrast with the deceleration in real nonresidential fixed investment, which increased merely 1.7 percent, compared with 15.7 percent growth in the third quarter.

Private inventory is a bright spot in the fourth quarter economic performance as enterprises inventory spending surged to 56 billion U.S. dollars after a 2 billion decline in the prior quarter. However, it sparked concerns that inventory would slow down in the first three months of 2012.

The positive contribution from personal consumption, business inventory and residential fixed investment were partly offset by the decrease in government spending. Federal government spending declined 7.3 percent, in a sharp contrast to an increase of 2.1 percent in the third quarter.

Exports increased at the same pace in the third quarter while imports growth quickened to a pace of 4.4 percent.

For all of 2011, the world's largest economy expanded 1.7 percent, less than the 3 percent of 2010.

"Today 's report shows that the economy posted its tenth straight quarter of positive growth," Alan Krueger, chairman of the White House Council of Economic Advisers, said on Friday, noting that faster growth is needed to replace the jobs lost in the recent downturn and to reduce long-term unemployment.

Figures from the Labor Department showed the U.S. unemployment rate nudged down to 8.5 percent in December 2011, the lowest level since February 2009. However, economists argued the current economic growth was not strong enough to bring noticeable improvement to the labor market where 13.1 million Americans are still jobless.

The U.S. Federal Reserve officials became a little pessimistic about the U.S. economic outlook. The Fed said Thursday in a statement after its two-day meeting that the U.S. economy had been "expanding moderately" and economic growth in the coming quarters would only be "modest."

The central bank cautioned the unemployment rate remained elevated, housing sector remained depressed, and the strains in the global financial markets continued to pose "significant downside risks" to the U.S. economic outlook.

The Fed marked down its forecasts for the U.S. economic growth both for 2012 and 2013 in its latest quarterly estimate and pledged to keep interest rate low until at least late 2014.

The International Monetary Fund (IMF) said in its report Tuesday the "U.S. economy is susceptible to a range of shocks from the euro area" because of the close financial and trade integration across the Atlantic. The fund sharply cut its forecast for global economic growth, saying debt crisis woes in eurozone posed threat to the global recovery.