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UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who covered Washington during all or part of ten of America's presidencies and who has edited alternative journals since 1964. The Review, which has been on the web since 1995, is now published from Freeport, Maine. We get over 5 million article visits a year. See prorev.com for full contents of our site

January 29, 2010

INVENTORY DUMPING SLOWS, BOOSTING GDP


 CNN

Reuters - The economy grew at a faster-than-expected 5.7 percent pace in the fourth quarter, the quickest in more than six years, as businesses made less-aggressive cuts to inventories and stepped up spending.

The robust performance closed out a year in which the economy contracted 2.4 percent, the biggest decline since 1946. . .

When businesses are selling off inventories, there is less need to step up production and therefore weighs on GDP. The slowing rate of inventory reduction in the fourth compared to the third quarter lifted GDP by nearly 3.4 percentage points.

... But even stripping out inventories, the economy expanded at an annual rate of 2.2 percent, accelerating from the 1.5 percent increase in the third quarter, reflecting relatively strong performance from other segments of the economy.

Still, this measure of final demand is meager compared with most normal recoveries, implying the Federal Reserve can bide its time before raising interest rates.

Consumer spending increased at a 2 percent annual rate in the fourth quarter, contributing 1.44 percentage points to GDP. In the third quarter, consumer spending had risen at a 2.8 percent pace, supported by the government's "cash for clunkers" auto incentive program.

Business investment grew at a 2.9 percent rate, the first increase since the second quarter of 2008, as the drag from the troubled commercial real estate sector was offset by robust spending on equipment and software.

The growth of spending on new home construction braked sharply in the fourth quarter to an annual rate of 5.7 percent from an 18.9 percent pace in the third quarter. Home building has received a lift from a popular tax credit for first-time buyers, but recent data have hinted at some weakness starting to creep in.

Export growth outpaced imports, narrowing the trade gap and adding half a percentage point to GDP growth in the last quarter.


2 Comments:

Anonymous MonkeyMuffins said...

Yawn...

Garbage in, garbage out.

"It is better to be roughly right than precisely wrong, GDP is precisely wrong."
- Tim Jackson, author of, Prosperity Without Growth: Economics for a Finite Planet

January 29, 2010 6:24 PM  
Anonymous Jeff Green said...

Thank you for posting this update. The halt in the spending for new home construction is a bad news for new home builders. Hoping for some bright results for this year.

February 1, 2010 11:01 PM  

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