Friday, January 29, 2010

U.S. 4th Quarter 2009 GDP Growth Surprises at 5.7%

The Commerce Department announced their "advance" GDP growth rate for 4th quarter at 5.7% this morning.  Expectations had been around a consensus number of 4.5%, so this was a positive surprise.  Much of the strength came from cyclical recovery in inventories (i.e. companies quit letting inventory levels just decline and instead increased production to replenish inventories).

While GDP 4th quarter strength is a plus, it comes against the backdrop of significant structural challenges in the U.S. and worldwide economies.   Examples of these challenges are timing and methods of removal of low interest rates and other stimulus by the Fed, possible long-term increased savings (and resultant consumption reduction) by U.S. consumer, and effect of eventually addressing U.S. and other developed countries budget deficit.

We'd conclude these comments with applause for today's GDP announcement accompanied by recognition that the private sector will need significant strength and resilience as we address a variety of sizeable challenges.