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Economy in Brief

U.S. GDP Growth Strengthens
by Tom Moeller  January 28, 2011

Real GDP increased 3.2% (SAAR) last quarter. Though the gain fell short of Consensus expectations for a 3.6% increase, it was the strongest since Q1 2010. For the full year, real GDP rose a moderate 2.9% and recouped the 2.6% lost during 2009.

Powering last quarter's increase in total output was a 7.1% increase in final sales. That was the strongest, by a sliver, since Q3 1983 (no typo). The jump was fueled by a positive foreign trade effect of 3.4 percentage points. Exports rose at an 8.5% rate (8.9% y/y) while imports fell 13.6% (+10.6% y/y). It reversed most of the Q3 increase. Inventory decumulation offset the add from foreign trade. Lower inventories subtracted 3.4 percentage points from Q4 growth, the most since Q1 1988.

Domestic final demand growth improved during Q4. The 3.4% gain (AR) pulled the annual increase up to a moderate 1.9%, the most since 2006. Personal consumption grew at a firmed 4.4% rate with a jump in autos but growth in business investment eased to 4.4%, its weakest of the economic recovery. Residential investment grew at a moderate 3.4% rate. Nevertheless, the moderated 3.0% full-year decline in investment was the fifth drop in as many years. Government spending slipped at a 0.6% rate led by a 0.9% decline in state & local which fell 1.3% for the full year due to lower tax receipts. Federal spending slipped (+4.8%) for the first down quarter since Q1 2009.

Price inflation as measured by the chained GDP price index rose a modest 0.3%. The personal consumption chain price index rose 1.8% (1.2% y/y). The price index for fixed business investment rose by 0.8% (-0.3% y/y) but the residential investment price index rose at a 2.1% rate (-0.2% y/y). That compares to a 3.4% decline during all of last year. The GDP figures are available in Haver's USECON and USNA databases and the expectations number is in MMSAMER.

The most recent Livingston Survey of economic forecasters from the Federal Reserve Bank of Philadelphia can be found here.

Chained 2005 $, % AR Q4'10
(Adv.)
Q3
10
Q2
10
Q4
Y/Y
2010 2009 2008
GDP 3.2 2.6 1.7 2.8 2.9 -2.6 -0.0
  Inventory Effect -3.7 1.6 0.8 0.3 1.5 -0.5 -0.5
Final Sales 7.1 0.9 0.9 2.5 1.4 -2.1 0.5
  Foreign Trade Effect 3.4 -1.7 -3.5 -0.4 -0.5 1.0 -1.1
Domestic Final Demand 3.4 2.6 4.3 2.9 1.9 -3.1 -0.6
Demand Components
Personal Consumption 4.4 2.4 2.2 2.7 1.8 -1.2 -0.3
Business Fixed Investment 4.4 10.0 17.2 9.8 5.5 -17.1 0.3
Residential Investment 3.4 -27.3 25.6 -4.6 -3.0 -22.9 -24.0
Government Spending -0.6 3.9 3.9 1.4 1.1 1.6 2.8
Prices
Chained GDP Price Index 0.3 2.1 1.9 1.3 1.0 0.9 2.2
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