4th quarter GDP growth advance estimate: 5.7% growth

[wiegie]

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 5.7 percent in the fourth quarter of 2009, (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.

 

http://www.bea.gov/newsreleases/national/g...newsrelease.htm

 

Two things:

 

1) I am really quite positively surprised by this high growth rate.

 

2) This is only the "advance" estimate and it is subject to some revisions over the next two months

[Ursa Majoris]

http://www.bea.gov/newsreleases/national/g...newsrelease.htm

 

Two things:

 

1) I am really quite positively surprised by this high growth rate.

 

2) This is only the "advance" estimate and it is subject to some revisions over the next two months

I saw 3 to 4% guessed at tin the paper yesterday so this number is a surprise. I would expect it to be rolled back a bit later.

[The Irish Doggy]

Just a hair over the 2008 4th quarter, but I'll take it.

[dmarc117]

yep, things are all better.

[wiegie]

yep, things are all better.

let me be clear, I don't not think that things are all better (as I think the financial system still has some significant problems), but this number is about 1.5 percentage points higher than what I had been expecting.

 

No matter what, this number is NOT bad news.

[dmarc117]

let me be clear, I don't not think that things are all better (as I think the financial system still has some significant problems), but this number is about 1.5 percentage points higher than what I had been expecting.

 

No matter what, this number is NOT bad news.

 

 

i wasnt talkin about you. just the number. i dont believe it. i'll be interested in the revisions.

Edited January 29, 2010 by dmarc117

[wiegie]

i wasnt talkin about you. just the number.... i'll be interested in the revisions.

me too--it wouldn't surprise me if the final estimate dropped into the 4's. (Typically final estimates are within about 1 percentage point of the advance estimates, but this are still not typical times.)

[dmarc117]

me too--it wouldn't surprise me if the final estimate dropped into the 4's. (Typically final estimates are within about 1 percentage point of the advance estimates, but this are still not typical times.)

 

 

do you ever think that these numbers are fudged sometimes?

[bpwallace49]

wiegie, what would you attribute this to? I assume that these are adjusted for seasonal activity (like hiring and employmnet rates)?

 

What indicators have you seen that explain this? Because unemploymnet is still pretty high . . .

[The Irish Doggy]

Because unemploymnet is still pretty high . . .

 

Unfortunately/fortunately unemployment is always a lagging indicator. When the economy goes south, most businesses try not to cut jobs until they have to. When it recovers, they try to make do with what they have until it is very clear they need more people. Plus, it takes time to hire and/or figure out who to let go. So, unemployment is always in reaction to the market.

[wiegie]

do you ever think that these numbers are fudged sometimes?

If by "fudged" you mean biased for political reasons, then "no"

If by "fudged" you mean that they make some initial assumptions that might be wrong, then "yes". (However, the BEA is very clear that this initial numbers are based on incomplete data and are subject to revisions, so I'm not quite sure the word "fudged" really captures what is happening.)

 

I'll not that the estimates put out by the BEA and BLS are viewed around the world as being very objective. (For example, when I was in Germany, I attended a lecture by a French economist who was testing an economic model that he had developed. Did he use French data to test his model? No. Did he use German data to test his model? No, He used U.S. data because it is viewed as basically the best data in the world.

[bpwallace49]

Unfortunately/fortunately unemployment is always a lagging indicator. When the economy goes south, most businesses try not to cut jobs until they have to. When it recovers, they try to make do with what they have until it is very clear they need more people. Plus, it takes time to hire and/or figure out who to let go. So, unemployment is always in reaction to the market.

 

Agreed . . but with indicators showing a great growth in goods and services rendered, there is a leveling point for production increases without a corresponding rise in hiring, right?

 

And with unemployment INCREASING in some areas, that is counter-intutive to a rise in growth and production, isnt it?

[bpwallace49]

do you ever think that these numbers are fudged sometimes?

 

I blame that mean ol Obama . .

[dmarc117]

I blame that mean ol Obama . .

 

 

i dont care what side it comes from. i can see the govt. fudging numbers to ease panic and fear.

[wiegie]

wiegie, what would you attribute this to? I assume that these are adjusted for seasonal activity (like hiring and employmnet rates)?

 

What indicators have you seen that explain this? Because unemploymnet is still pretty high . . .

As indicated above, unemployment is a lagging indicator (and I expect that it will stay high for a long time still).

 

As for GDP itself, it is seasonally adjusted.

 

As for what has caused the GDP number to be high, I just looked here:

http://www.bea.gov/national/nipaweb/TableV...09&Freq=Qtr

and now I am sad to say that this high number probably doesn't tell us too much. Most of the increase in GDP was due to increases in businesses rebuilding their inventories, rather than being driven by actual changes in the purchases of good and services by final users (such as households or fixed business investment). Now that inventories have been rebuilt, we should NOT expect to see inventories contribute as much to future GDP. Hence this big increase in GDP was likely a one-shot thing and we should NOT expect to see it continue to be as high in coming quarters.

[wiegie]

i dont care what side it comes from. i can see the govt. fudging numbers to ease panic and fear.

the BEA does NOT do this

 

seriously

 

If you think the BEA does do it, then you are in the same line as the Truthers or the people who think the moon landings were faked.

[bpwallace49]

As indicated above, unemployment is a lagging indicator (and I expect that it will stay high for a long time still).

 

As for GDP itself, it is seasonally adjusted.

 

As for what has caused the GDP number to be high, I just looked here:

http://www.bea.gov/national/nipaweb/TableV...09&Freq=Qtr

and now I am sad to say that this high number probably doesn't tell us too much. Most of the increase in GDP was due to increases in businesses rebuilding their inventories, rather than being driven by actual changes in the purchases of good and services by final users (such as households or fixed business investment). Now that inventories have been rebuilt, we should NOT expect to see inventories contribute as much to future GDP. Hence this big increase in GDP was likely a one-shot thing and we should NOT expect to see it continue to be as high in coming quarters.

 

Hm . . thanks.

 

These stats from your linked article are positive signs for individuals, and hopefully the saving trend continues. I just hope it doesnt stymie consumer spending that we could use to stimulate economic activity.

 

Disposable personal income increased $130.8 billion (4.8 percent) in the fourth quarter,

compared with an increase of $31.6 billion (1.2 percent) in the third. Real disposable personal income

increased 2.1 percent, in contrast to a decrease of 1.4 percent.

 

Personal outlays increased $109.0 billion (4.2 percent) in the fourth quarter, compared with an

increase of $132.3 billion (5.2 percent) in the third. Personal saving -- disposable personal income less

personal outlays -- was $516.9 billion in the fourth quarter, compared with $495.0 billion in the third.

The personal saving rate -- saving as a percentage of disposable personal income -- was 4.6 percent in

the fourth quarter, compared with 4.5 percent in the third. For a comparison of personal saving in

BEA’s national income and product accounts with personal saving in the Federal Reserve Board’s flow

of funds accounts and data on changes in net worth, go to http://www.bea.gov/national/nipaweb/Nipa-

Frb.asp.

[Savage Beatings]

How much of that growth comes from increases in Government spending?

[bpwallace49]

How much of that growth comes from increases in Government spending?

 

Real federal government consumption expenditures and gross investment increased 0.1 percent

in the fourth quarter,

 

 

You are welcome . . . it is all in the article . .

[wiegie]

Real federal government consumption expenditures and gross investment increased 0.1 percent

in the fourth quarter,

 

 

You are welcome . . . it is all in the article . .

Actually, overall government expenditures decreased (very slightly) in the 4th quarter.

Edited January 29, 2010 by wiegie

[Savage Beatings]

Then I'd say that it's great news!

[Ursa Majoris]

As indicated above, unemployment is a lagging indicator (and I expect that it will stay high for a long time still).

 

As for GDP itself, it is seasonally adjusted.

 

As for what has caused the GDP number to be high, I just looked here:

http://www.bea.gov/national/nipaweb/TableV...09&Freq=Qtr

and now I am sad to say that this high number probably doesn't tell us too much. Most of the increase in GDP was due to increases in businesses rebuilding their inventories, rather than being driven by actual changes in the purchases of good and services by final users (such as households or fixed business investment). Now that inventories have been rebuilt, we should NOT expect to see inventories contribute as much to future GDP. Hence this big increase in GDP was likely a one-shot thing and we should NOT expect to see it continue to be as high in coming quarters.

The upside being that businesses replenishing inventory are expecting to sell said inventory, right?

[wiegie]

The upside being that businesses replenishing inventory are expecting to sell said inventory, right?

yes

 

I'd just be a lot happier if inventory investment was not driving well more than half of the GDP growth. If now that inventories are replenished and companies just decided to replace the inventory as it get sold, then growth this quarter is going to be quite a bit lower. (In fact, if we omit inventory investment from 4th quarter GDP growth, then it would have only been a little bit above 2%.)

 

Now don't get me wrong, this 5.7% growth rate (assuming it is maintained after revisions come in) is not a bad sign at all. I just don't think it will/can be sustained even for one more quarter. I hope I'm wrong though!

[Ursa Majoris]

yes

 

I'd just be a lot happier if inventory investment was not driving well more than half of the GDP growth. If now that inventories are replenished and companies just decided to replace the inventory as it get sold, then growth this quarter is going to be quite a bit lower. (In fact, if we omit inventory investment from 4th quarter GDP growth, then it would have only been a little bit above 2%.)

 

Now don't get me wrong, this 5.7% growth rate (assuming it is maintained after revisions come in) is not a bad sign at all. I just don't think it will/can be sustained even for one more quarter. I hope I'm wrong though!

5.7% is pretty high even under the best of circumstances, isn't it? Certainly it isn't sustainable for long but neither was the meteoric rise in the stock market. At this point, I'd be pleased to see slower but steady growth across all indicators rather than the violent rollercoaster ride we're on.

[bpwallace49]

I also liuked how gubmnet spending DECREASED during that time to help fuel that indicator. If only we could keep THAT metric on a decreasing path for more than one quarter!