Healthy Surprises in the Fourth-Quarter GDP Report

The U.S. economy finally seems to be recovering. In the fourth quarter, consumers reopened their wallets and manufacturers slashed inventories, indicating they're getting ready to ramp up production of more goods this year.

The GDP figures released by the government Friday for the last quarter contained a number of surprises: Consumer spending was up a strong 4.4% on annualized basis, and final sales -- that's GDP without inventories -- surged ahead 7.1%, its largest jump in nearly 30 years.

"The pace of consumption is phenomenal, but no one should expect this to be maintained," says Tom Porcelli, chief economist for RBC Capital Markets in New York. He says spending is likely to average 3% for the year because job growth remains relatively modest. But Porcelli says the report was especially encouraging because it showed growth across the board, with a boom in auto sales contributing 0.9% to GDP, and nondurable consumer goods adding 0.8%.

Trade was also a big contributor to the economic gains, with exports surging 8.5% and imports declining 13.6%.

"Our exports continue to move long at a fairly robust pace, thanks to economic activity taking place outside our borders," Porcelli says. "That's providing a nice boost to our economy."

Restocking of Lean Inventories Is Likely


Inventories showed one of the most striking changes: They had ballooned by $121 billion in the third quarter, but only rose by $7 billion in the final three months of the year.
"That should leave businesses in a position of lean stocks again heading into the new year, so that production is likely to ramp up, both to fulfill firming demand and replenish depleted warehouses and shelves," says Stephen Stanley, chief economist at Pierpont Securities in Westport, Conn. In his opinion, the low inventory numbers are likely to create a flurry of upward revisions in GDP estimates for the first quarter.

The current consensus average among economists places first-quarter 2011 GDP growth at 3.25%. Stanley thinks the actual growth number will be more like 3.5% to 4%. "I expect business investment in equipment and software to surge in the first quarter a pent-up capital outlays are unleashed," he adds.

While 2011 isn't going to be a "blowout" for the economy, according to Porcelli, growth should be healthy throughout the year. And if consumers can keep spending at the fourth quarter's pace, it may even surprise to the upside.

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chc1940

Don't you believe a damn word of it! More obama propaganda!!!

January 31 2011 at 7:29 AM Report abuse +1 rate up rate down Reply
martinsportraits

This is probably the most ridiculous article I have read in the last six months , Once again Charles Wallace proves we have the best journalists Wall Street can pay off!..........Charlie , you are indeed a disgrace to your profession!

January 31 2011 at 6:37 AM Report abuse +1 rate up rate down Reply
National

Let's see: Unemployment is still above 9.0%, Housing prices are still dropping in all 14 regions, 2011 will set a record for foreclosures, the FDIC has been bankrupt since November 2009 and is drawing on a $500 BB treasury line of credit, 200 banks a year are going bankrupt, Social Security had a $76 BB shortfall in 2010 (it is already bankrupt), we have unfunded liabilities of $310 Trillion ($310,000 for every man woman and child), our budget debt is over $14 Trillion, this years deficit will set another Obama record, there is real inflation despite the government reported CPI numbers (anyone been food shopping lately?). And on and on. YUP.... things sure are rosy !! Supposed financial reporters continue to do everyhting they can to pump up the markets... investigative and honest journalism died a long time ago.

January 31 2011 at 4:22 AM Report abuse +5 rate up rate down Reply
Bill

I just receive an increase in FITW (that's federal icome tax withholding) and my income is not even half of the 250K Obama and the Dammed said would not see a tax increase. I guess all the money I worked hard for does not belong to me. The government (Obama and the Dammed) that produces absolutely nothing, zero, will decide how much of my own money they will let me keep. To Mr. Obama and the Dammed: give us back the money you stoled from us. If you do that, the economy will improve dramatically. If don't and keep stealing from us, we will become like Greece and Egypt.

January 31 2011 at 3:30 AM Report abuse +3 rate up rate down Reply
1 reply to Bill's comment
Bill

If "you" don't.....like Greece and Egypt.

January 31 2011 at 3:33 AM Report abuse rate up rate down Reply
davefromfwb1

I'm sure all this "growth" money is going right into the pockets of chinese manufacturing companies. It's so rediculous to say that America makes any money....all this country is, is a service industry country, nothing more. Would you like fries with that?

January 31 2011 at 2:18 AM Report abuse +2 rate up rate down Reply
martinsportraits

Mr. wallace is certainly a bought and paid for Wall St. journalist to spread such love story propaganda ......Main street America is on the skids and everybody knows it !!!! If you really believe the massive amount of manufacturing we continue to outsource is coming back you would have to be complete idiot! The big Corporate execs and their 50 million salaries are doing better than ever ....As for America .....Healthy surprise! .....LMAO....Wait until you see the unemployment numbers and foreclose rates in the next six months , not to mention the nightmare deficit , cost of fuel ,Food, healthcare etc.. etc ....The great American Industry has now become Tumbleweeds in the desert and boarded up windows!

January 31 2011 at 1:49 AM Report abuse +3 rate up rate down Reply
1 reply to martinsportraits's comment
davefromfwb1

I agree 100% we haven't seen the worst of it and I wouldn't be surprised if Egypt is in riots because we couldn't pay them back the money we've borrowed from them! ha ha ha

January 31 2011 at 2:20 AM Report abuse +1 rate up rate down Reply
icemanbill23

Geez, I checked in to find some intellectual discussion and this is what I get?...A chatroom full of immature children. I'm outta here!

January 31 2011 at 12:33 AM Report abuse -3 rate up rate down Reply
2 replies to icemanbill23's comment
ibemewhoyoube

No problem pal.

January 31 2011 at 12:37 AM Report abuse +2 rate up rate down Reply
onemightylight

Something over your head? hehehehe

January 31 2011 at 1:22 AM Report abuse +2 rate up rate down Reply
ibemewhoyoube

Next!!!!

January 31 2011 at 12:28 AM Report abuse +2 rate up rate down Reply
ibemewhoyoube

Ran away to get reinforcements? Probably calling the pansy teamster brigade.

January 31 2011 at 12:27 AM Report abuse +2 rate up rate down Reply
ibemewhoyoube

Come on Busielib. We know you're there, so start giving the thumbs down. Did we hurt the widdle teamsters feelings?

January 31 2011 at 12:25 AM Report abuse +2 rate up rate down Reply