Unexpected: An “Unexpected” Economic Report…
…In our favor
WASHINGTON (Reuters) – The economy grew at a faster-than-expected 5.7 percent pace in the fourth quarter, the quickest pace in more than six years, as businesses reduced inventories less aggressively, the Commerce Department said on Friday.
Now it’s easy to have a high rate of growth when you’re starting with a smaller economy, obviously, but this is a hopeful development.
Now, there are some things that do concern me in this report, however:
Growth was boosted a sharp slowdown in the pace of inventory liquidation, a factor that could mask the strength of the economic recovery from the longest and deepest downturn since the Great Depression.
…Business inventories fell only $33.5 billion in fourth quarter after dropping $139.2 billion in the July-September period. The change in inventories alone added 3.39 percentage points to GDP in the last quarter. This was the biggest percentage contribution since the fourth quarter of 1987.
For the whole of 2009, the economy contracted 2.4 percent, the biggest decline since 1946, the first year after the end of World War II, the department said.
In the last three months of 2009, consumer spending increased at a 2 percent annual rate, below the 2.8 percent annual pace in the prior quarter when consumption got a boost from the government’s “cash for clunkers” program.
To my untrained mind a slowing down of inventory liquidation could indicate that stuff ain’t selling.
But we’ll see.
Biz | Mr. Bingley | 
January 29, 2010 9:00 am
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It also might mean that inventory is down to the cr*p that will never sell.
Consumer spending under the grossly inflated prior quarter, that sounds rather bleak and should give perspective to the reduced inventory levels in the GDP. Seems like that “marginal propensity to consume” thingy just got more marginal. With the U6 labor stat in the upper teens range this is not surprising.
Next quarter, we might see another “unexpected” report, but probably not in the sense that the O!bama would like it to be.
A friend of mine said much the same thing to me before the report – like over 2 weeks ago… nothing is selling and that ain’t good no matter what the media saying. *sigh*