5.7 percent 4Q GDP growth … then a slowdown
Or so says RDQ Economics:
The recovery from the Great Recession firmed in the fourth quarter as real GDP increased at its fastest rate since the third quarter of 2003. However, also as expected, a sharp slowing in inventory liquidation accounted for 3.4 percentage points (or 60%) of the 5.7% increase in real GDP. We are particularly impressed by the 13.3% increase in nonresidential investment (upside risk in this area was flagged by yesterday’s durable goods report).
We were also pleased that none of the growth came from government spending, which fell by 0.2%. From the Fed’s perspective, however, this report does not bring a rate hike closer. First, the unemployment rate rose from 9.6% in the third quarter to 10.0% in the fourth (raising upside risk to the estimates for potential growth). Second, the GDP deflator increased by only 0.6% (although, perhaps counter-intuitively, this modest gain was due to the subtraction effect of higher import prices, which surged 16.3%—the price index for domestic purchases rose 2.1% in the fourth quarter, which is a measure of what people and businesses paid, whereas the GDP price index measures the price of what the U.S. produced).
Nominal GDP growth was a robust 6.4% in the quarter (and 0.8% year-over-year). As the addition to growth from inventories fades somewhat, we see growth in the first quarter of 2010 at around 2½%