GDP – Fourth Quarter 2009 (Second Estimate)
“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 5.9 percent in the fourth quarter of 2009 (that is, from the third quarter to the fourth quarter) according to the “second” estimate released by the Bureau of Economic Analysis”
Wow, awesome, super, start hiring people, recovery is here! Errrrt! Not so fast. While this should be taken as positive economic news on it’s face, I am afraid to be a Debbie Downer, but reality checks are my speciality. Inside the numbers, the revised estimate from 5.7% to 5.9% comes from gross private domestic investment which indicates that businesses are leading the recovery and the change in private inventories which showed the biggest upward revision to make up for 3.9% of the 5.9% GDP growth. Nerdy economists (the original Debbie Downers) however are not impressed with this revision as a sign of economic health rather a belief that recovery is sure to come…but not here yet. So, I guess that is the good news. The bummer of the 4Q GDP is that personal consumption is weak which, given the high unemployment and underemployment rate, is understandable as people are just unable to spend money – both paper and plastic.
Consumer spending accounts for a large part of GDP – almost 70% – so we need that to rise or else growth in the next couple quarters will go down. However, we cannot go into additional debt for consumption sake. Cases in point: Consumer debt: $13.5 trilly, Non-financial business sector debt: $11 trilly, Financial sector business debt : $16 trilly, State & gov’t local debt: $2.3 trilly, federal debt – not including future entitlements: $7.5 trilly (“Trilly” is my cute word for “trillion” as in trillions of dollars, eases the pain. ) Net exports increased from 1.9% to 2.3% – Hooray! But imports were revised up from 1.4% to 2% – Boooo! While I am happy to see the GDP revised upward we have a long way to go. Baby steps people.
