Q4 GDP Growth = 3.1%

In January, the first report on Q4 GDP said that the economy grew by 3.2%. Then in February, that was revised down to 2.8%. Then this morning, it was revised back up to 3.1%.

Glad that’s all cleared up!

Economists had expected G.D.P. growth, which measures total goods and services output in the United States, to be revised up to 3.0 percent. The economy expanded at a 2.6 percent rate in the third quarter. For the whole of 2010, the economy grew 2.9 percent, while corporate profits grew 20.4 percent, the most since 2004.

Data so far suggest that the economy maintained this growth pace in the first quarter of this year, but there are concerns that rising oil prices could crimp consumer spending and slow the economic recovery.

The pick-up in growth has been acknowledged by the Federal Reserve, which injected huge amounts of money into the economy to stimulate demand. The central bank is expected to end its $600 billion government bond buying program at the end of June.

The raised fourth-quarter growth estimates reflect stronger business spending and inventory accumulation.

Business investment rose at a 7.7 percent rate instead of 5.3 percent, lifted by spending on equipment and software (Oracle Hint Hint!!), as well as on structures. Spending grew at a 10.0 percent pace in the third quarter.

Spending on software and equipment increased at a 7.7 percent rate instead of 5.5 percent. Investment in structures rose at a solid 7.6 percent, the first increase since the second quarter of 2008.

Business inventories increased $16.2 billion instead of the $7.1 billion estimated last month, subtracting a smaller 3.42 percentage points from G.D.P. growth rather than the previously reported 3.70 percentage points.

Excluding inventories, the economy expanded at an unrevised 6.7 percent pace, the fastest increase in domestic and foreign demand since 1998. Domestic purchases grew at a 3.2 percent rate instead of 3.1 percent.

Consumer spending, which accounts for more than two-thirds of United States economic activity, grew at a 4.0 percent rate in the final three months of 2010 instead of 4.1 percent. It was still the fastest since the last three months of 2006, and an acceleration from the third quarter’s 2.4 percent rate.

The growth in exports was not as strong as previously estimated, while imports were revised a touch down. Trade added 3.27 percentage points to G.D.P. growth instead of 3.35 percentage points. Government spending contracted at a 1.7 percent rate rather than 1.5 percent, because of weak state and local government outlays.

The G.D.P. report confirmed a pick-up in inflation pressures on surging food and gasoline prices. The personal consumption expenditures index rose at a revised 1.7 percent rate in the fourth quarter instead of 1.8 percent. That compared with the third quarter’s 0.8 percent increase.

But a “core” price index closely watched by the Fed advanced at a revised 0.4 percent rate instead of 0.5 percent. The increase was the smallest rise on record.

Posted by on March 25th, 2011 at 9:26 am


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