US 4Q GDP Grows More Than Expected

inspector_monkfish

WASHINGTON--The U.S. economy surged at the end of 2009, a
bigger-than-expected gain driven more by slower inventory liquidation than by consumer spending.

Gross domestic product rose a seasonally adjusted 5.7% annual rate October through December, the Commerce Department said Friday in its first estimate of fourth-quarter GDP.

Economists surveyed by Dow Jones Newswires had forecast 4.8% GDP growth during the fall.

GDP has gone up two straight quarters, rising 2.2% in the third quarter after a year of contraction. In all of 2009, GDP fell 2.4%, the biggest drop for an entire year since 10.9% in 1946. GDP rose 0.4% in 2008 and 2.1% in 2007.

GDP is the broad measure of economic activity in the U.S. Most of the 5.7% increase during the last months of 2009 was due to a slower drawdown in business inventories. Real final sales of domestic product, which is GDP less the change in private inventories, increased at an annual rate of only 2.2% in the fourth quarter. Third-quarter real final sales of domestic product rose by 1.5%.

Friday's data showed businesses in the U.S. pared inventories October through December by $33.5 billion.

Companies earlier in the year had slashed excess supplies by $139.2 billion in the third quarter and $160.2 billion in the second. The recession snuffed demand and had left storerooms and shelves bulging with unsold merchandise.

The slower fourth-quarter inventory drawdown added 3.39 percentage points to GDP.

Consumer spending, on the other hand, contributed 1.44 percentage points. Spending is the largest component of GDP, the so-called big engine of the economy. The report Friday said it rose by 2.0% in the fourth quarter. Third-quarter spending had climbed higher, rising 2.8% with the support of the government "cash-for-clunkers" subsidy program.

"Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit," the Federal Open Market Committee of policymakers said this week. The observation was included in a statement issued Wednesday by Fed policymakers after they agreed to leave interest rates alone. The bankers said inflation is likely to be subdued. Friday's GDP report showed the core inflation rate - which strips out volatile food and energy prices and is closely watched by central bankers - rose 1.4% in the fourth quarter, after rising 1.2% in the third quarter. Fed officials define their statutory goal of price stability as inflation of 1.5% to 2%.

Other price inflation gauges also rose modestly. The price index for personal consumption expenditures climbed by 2.7% after increasing 2.6% in the third quarter.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, rose by 2.1%, after increasing 1.3% in the third quarter. The chain-weighted GDP price index increased 0.6%, after rising 0.4% in the third quarter.

Another component of GDP, housing, rose a second straight quarter.
Residential fixed investment increased by 5.7% October through December. It surged 18.9% in the third quarter; builders were breaking ground as a government tax credit spurred buying of new houses.

Federal government spending in the fourth quarter increased 0.1%, after rising 8.0% in the third quarter. State and local government outlays fell 0.3%, the fourth drop in five quarters.

International trade gave a mild push to GDP. U.S. exports surged 18.1%, while imports increased 10.5%.

Business spending also boosted GDP. It rose by 2.9% in the fourth quarter, after falling 5.9% in the third quarter.

3M Co. (MMM) this week topped Wall Street earnings estimates for the fourth quarter and raised its 2010 outlook. The company makes a variety of products and materials used in construction and auto making. 3M's chairman, George Buckley, predicted the U.S. automotive and housing industries won't recover until unemployment declines. He said the U.S. economy isn't likely to weaken further in 2010, but added he doesn't expect robust growth, either.

Spiv_2

WOW.

Yanks usually have to revise down but WOW.

purch

Most of the 5.7% increase during the last months of 2009 was due to a slower drawdown in business inventories

The devil is in the...............:eek:

Generali

purch wrote: »

The devil is in the...............:eek:

Withdrawal of QE?

DaddyBear

Now THAT's a recovery!!!!

That's what happens when you spend money on improving your economy and not on keeping house prices inflated. USA got a much needed housing correction and now a significant rise in GDP.

What did we get?? 10% YOY HPI and 0.1% rise in GDP. We are screwed.