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AP Crows: 4th Quarter GDP Grew 5.7%

From a walking on air Associated Press:

Economy grows at 5.7 pct pace, fastest since 2003

January 29, 2010

The economy grew faster than expected at the end of last year, though the engine of that growth — companies replenishing stockpiles — is likely to weaken as consumers keep a lid on spending.

The 5.7 percent annual growth rate in the fourth quarter was the fastest pace since 2003. The Commerce Department report Friday is the strongest evidence to date that the worst recession since the 1930s ended last year, though an academic panel that dates recessions has yet to declare an end to it.

The two straight quarters of growth followed a record four quarters of decline. Still, the expansion in the fourth quarter was fueled by companies refilling depleted stockpiles, a trend that will eventually fade. Some economists worry that when that happens, the recovery could

Growth exceeded expectations mainly because business spending on equipment and software jumped 13.3 percent — much more than forecast.

The report provided an upbeat end to an otherwise dismal year: The nation’s economy declined 2.4 percent in 2009, the largest drop since 1946.

Still, economists expect growth to slow this year as companies finish restocking inventories and as government stimulus efforts fade. Many estimate the nation’s gross domestic product will slow to a 3 percent rate in the current quarter and to about 2.5 percent for 2010.

About 60 percent of the fourth quarter’s growth resulted from a sharp slowdown in the reduction of inventories as firms began to rebuild stockpiles depleted by the recession.

Excluding inventory changes, the economy would have grown at a 2.2 percent clip, the government said. That’s an improvement from 1.5 percent in the third quarter.

Besides business spending on equipment and software, also powering growth in the October-December period was consumer spending, which rose 2 percent.

A steep increase in exports also helped boost growth. The shipment of goods overseas rose 18.1 percent, far outpacing a 10.5 percent rise in imports.

Government spending was actually a slight drag on growth in the fourth quarter: A small increase in federal spending was outweighed by a drop in state and local spending.

Note that even the Associated Press grudgingly admits that this ‘growth’ was all about the reduction of inventories. And apart from that, the economy would have only grown at a 2.2 percent clip.

Even so, we fully expect these numbers will be quietly revised down, just as they always have been with the Obama administration.

This article was posted by Steve on Friday, January 29th, 2010. Comments are currently closed.

14 Responses to “AP Crows: 4th Quarter GDP Grew 5.7%”

  1. Ted Abhour says:

    AP should be renamed APU because all we see these days from them is

    Associated Press Unexpectedly ….

  2. GL0120 says:

    Why don’t we start a poll; who can predict the real GDP (when it’s finally announced)?
    Closest without going over wins.
    I’ll start at 2.3% (but only because I’m such an optimist).

  3. proreason says:

    GDP doesn’t measure the health of the economy, it measures economic activity. In other words, the amount of money that changes hands.

    And government spending is counted.

    So when the country is flooded with money that the government borrows from from the future to payoff political cronies today, GDP goes up. Like in the quarter the AP is crowing about.

    Unfortunately, there is a price to pay for borrowing from peter to pay paul

    And we will be paying for it for years.

    Now, if the money had actually created something, like new products or services, then it might be worth it. But this money was spent on 3 things:
    – handouts to deadbeats
    – payoffs to criminal co-conspirators
    – expanding government
    (note: some of the money has also been spent helping people who really need it and for useful projects, but it’s a pittance compared to the political spoils payments).

    So we would have been much better off if we had done nothing, and let the economy recover on its own

    The best indicators of the health of the economy are the real unemployment rate and the rate of personal bankruptcies (which is akin to the mortgage default rate).
    – we all know about unemployment. The real rate is now about 22%
    – Bankruptcies increased 33% in 2009, after increasing 32% in 2008.

    Personal Income is often cited, but it is closely related to GDP. Household net worth is another common statistic but is also often a false indicator because of financial bubbles like we have seen recently. Both of those statistics have been going up the last few months.

    On other thing to keep in mind is that the economy has a self correction mechanism. When the economy is bad, businesses naturally reduce costs (including laying people off). After costs are reduced enough, the businesses again become profitable because their revenues exceed their costs. As they become profitable again, they begin hiring.

    So if the criminal government had done NOTHING, things would have improved at some point on their own.

    The reason they passed the stimulus was to pay off their cronies and expand government. They looked at the unemployment statistics since the 1930’s and saw that in EVERY other recession since then, employment began to increase no later than the time that the fascists took office. That is why they confidently predicted unemployment would never rise above 8%, even though even those idiots knew that the cheese money wouldn’t be flooding into the economy for many months.

    Of course, they guessed wrong….but now that the money is flooding in, it props their chosen statistics up.

    Meanwhile, 30 million people need jobs.

    • proreason says:

      One other point.

      Arthur Laffer is predicting that unemployment will go down this year and the GDP will be very good, but not for the reasons you might think.

      He says that since this is the last year of the Bush tax cut, businesses will be pulling income from 2011 into 2010. They have mountains of accounting tricks to do that. And pulling income from a future year makes the target year appear much better than it really is.

      Which, he says, will make 2011 another disaster.

      Alll because of Central Planning…..i.e., government…..the enemy of the people.

  4. BillK says:

    Note how Barry and the left continuously told us that the “two quarter” rule for being in a recession wasn’t important, it was how people felt.

    But now they’re using the two quarter rule to determine that we’re “out.”

    Like so much else they do and say.

  5. Reality Bytes says:

    Know what’s the difference between the economy in NYC & the Titanic is? The Titanic had a band.

  6. AngryD says:

    Proreason strikes again!

    Another great post, buddy. I am curious about where your “real” unemployment number of 22% comes from. Is there a source? I’d like to cite it in a blog.

    As for the AP article in general– considering that unemployment is still on the rise, I think the general public could give a thin sh!t about what the GDP is. People who are wondering if they can feed their families are not really concerned if the OVERALL state of the economy is a happy one.

    The AP can cheerlead as much as they want with this article… I don’t think it’s going matter more than a fart in a hurricane.


    • proreason says:

      Here’s the first reporter I saw talk about the 22%. You see the number in other places as well.


      Point 1: The Labor Dept’s U-6 rate, counts “underemployed people”, who are people who have had to accept temp work rather than full-time work, and “discouraged workers”, who have stopped looking for work. The full U-6 rate is now about 17.6%, but about 3% of those are the underemployed people.

      Point 2: Even the full U-6 rate does not count everybody. The link explains that part, and the 22% is an estimate. There are no government stats with 22%.

      Point 3: Even the article doesn’t discuss the influx of new workers into the workforce. About 200,000 people reach an age monthly where they graduate or quit school and begin to look for work. I think, but don’t know for a fact, that they aren’t properly represented. If they get a job, they certainly are counted as employed, but the ones who don’t find work are probably omitted from all counts, because they aren’t able to collect unemployment.

      Point 4: I also doubt that any stats count older people or parents who need to reenter the workforce because there savings are depleted. There is probably a substantial number of people like that.

      Point 5: I also think there are probably several million people who are working in the underground economy but who are counted as discouraged workers. So they probably skew the % a bit high.

    • Perdido says:

      Point 6: Millions of Mexicans have gone back home. They’re not showing up in the stats, and they’re not making demands on the system, but they did account for an enormous amount of economic activity. And they were very much on the production side, the wealth creation side.

      The silver lining is this BS is going to show back up in ’11 and drown any chance of a Dem comeback for ’12. It’s at least something.

  7. Rip Cord says:

    Must be the Dead Cat Bounce from the Bush Administration. Because Barak Hussein Obama hasn’t done anything. YET! LOL

  8. GTBurns says:

    I do think these reports are going to save Obama at all. The more he tried to repair his reputation the worse he digs himself into a hole.

    I had a 1SG in BCT that told us in November 08 that, the economy is bad it was not going to get better in 4-6 years with a new president.

    Obama is a clueless idealist who is all about spewing “positivity” while he never does anything positive to fix things. He just cares about shoving an agenda down our throat that serves to fulfill his needs.When he gets called out, it is just more dodgy double speak to talk his way out of it.

    This goes in total contradiction of the person he sold himself as during the campaign, who was an outside beyond petty Washington politics.

    After the Scott Brown election, he knows it is the beginning of the end. He no longer has a filibuster proof congress, that congress only has at least one year left before they get smeared on November. It is certain he will be a one termer.


  9. Petronius says:

    Does this 4th quarter jump herald an economic expansion, or may it be in the nature of a dead cat bounce?

    The 4th quarter 2009 improvement needs to be put in perspective because the economy is coming off of a low base following a couple of tough years.

    Thus in terms of real GDP (dollars adjusted for inflation) we are functioning in the 4th quarter 2009 only at about 2006 economic levels.

    Compare the following data from the Bureau of Economic Analysis.

    Annual US real GDP in chained 2005 dollars (billions):

    2005 $12,638.4
    2006 $12,976.2
    2007 $13,254.1
    2008 $13,312.2
    2009 $12,988.7

    Seasonally adjusted annual rates for 4th Q real GDP in chained 2005 dollars (billions):

    4th Q 2005 $12,748.7
    4th Q 2006 $13,060.7
    4th Q 2007 $13,391.2
    4th Q 2008 $13,141.9
    4th Q 2009 $13,155.0


    It remains to be seen whether the 4th Q 2009 bounce heralds an expansion, or whether we are heading for years of Carteresque economic stagnation, stuck in a horizontal channel, to be capped with high inflation, increased interest rates, and a new follow-on recession.

    Rising interest rates and inflation are precursors of a coming recession. And both are beginning to move. Although the Fed is striving to maintain low interest rates, the Fed can only hold the line on short term rates. Long term rates, which the Fed cannot control, are creeping higher. Hence the looming trouble with bonds and US Treasuries, as reported by Bill Gross of PIMCO and others.

    Moreover, unemployment continues to rise (although the rate of rise may be slowing), consumer confidence remains low, and welfare roles are growing. Massive government spending programs on earmarks and transfer payments do nothing to create wealth.

    At present there is no reason to believe our economic troubles are over.

  10. TwilightZoned says:

    Unemployment will also go down a bit from the million or so hired for census taking. Once June rolls around and they are again unemployed it will be interesting to see what the percentage returns to.

  11. MinnesotaRush says:

    “Zowee, Batman!”

    “Not only did the economy grow at a 5.7 pct pace in the 4th quarter; but his holiness, o-blah-blah, saved or created a quadra-kabillion jobs on top of that!”

    “Holy happy days are back again!”

    .. so sayeth Robin (another fictional “character”).

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