2011Q4 GDP final: 3.0%

The final report on US economic activity in the fourth quarter of last year puts the GDP annualized growth rate at 3.0%, the same as the first revision.  The BEA also reports that the final GDP figure for the year was 1.7%, barely into stagnation territory:

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 3.0 percent in the fourth quarter of 2011 (that is, from the third quarter to the fourth quarter), according to the “third” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 1.8 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was also 3.0 percent (see “Revisions” on page 3).

Most of the growth in Q4 came from inventory expansion.  Real final sales of domestic product only hit 1.1% in Q4, a reversal of Q3:

Real final sales of domestic product — GDP less change in private inventories — increased 1.1 percent in the fourth quarter, compared with an increase of 3.2 percent in the third.

That kind of inventory shift can signal confidence in future growth from retailers and suppliers.  If they guess wrong, however, the excess inventory can depress future orders.  Yesterday, Commerce reported a 2.2% jump in durable-goods orders in February, but that followed a disastrous 4% drop in January.  This quarter seems to indicate that the inventory addition that comprised over half of this growth was a bad bet, and with gas prices rising, we may see inventories expanding from lack of demand again in March and April.

Reuters gives the report a mixed response:

The U.S. economy expanded a bit more slowly than expected in the fourth quarter while personal income grew at a much faster pace than previously thought, which should help underpin spending this quarter.

At the same time, new U.S. claims for unemployment benefits fell to a fresh four-year low last week, according to a government report that showed ongoing healing in the labor market.

Gross domestic product increased at a 3.0 percent annual rate, the quickest pace since the second quarter of 2010, the Commerce Department said in its final estimate on Thursday, unrevised from last month’s estimate.

That was below most economists’ expectations of 3.2 percent, though some had put the number at 3.0 percent, right on target for the final print. The economy grew at a 1.8 percent rate in the third quarter.

The weekly jobless claims number actually changed very little from the previous few weeks.  It has dropped into a range of 350K-370K this quarter, which is an improvement over last year, but the week-to-week changes have been margin-of-error amounts.  The real test of these measures will be in Q1 and more so in Q2, when rapidly rising gas prices really start biting into the disposable income of Americans.

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