GDP explosion

[Grumpier Than Uncle Joe]

Economy soars 5.7 percent, fastest in 6 years
 .On Friday January 29, 2010, 9:21 am
By Lucia Mutikani

WASHINGTON (Reuters) - The economy grew at a faster-than-expected 5.7 percent pace in the fourth quarter, the quickest in more than six years, as businesses made less-aggressive cuts to inventories and stepped up spending.

The Commerce Department said on Friday its first estimate put fourth-quarter gross domestic product growth at its fastest pace since the third quarter of 2003. The economy expanded at a 2.2 percent annual rate in the third quarter.

Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 4.6 percent rate in October-December period.

"Wow, great number. It's very solid and gives us a running start into the second half of the year when we can't rely on government stimulus," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

"That's part of the plan, to get us moving as fast as possible so when life support is removed we'll have a pulse."

U.S. stock index futures extended gains on the data, while Treasury debt prices deepened losses. The dollar rose against the yen.

Getting the economy on a sustainable growth track remains one of the key challenges facing President Barack Obama, who on Wednesday outlined a raft of measures to create jobs and nurture the recovery.

Growth was boosted by a sharp slowdown in the pace of inventory liquidation, a factor that could mask the strength of the economic recovery from the longest and deepest downturn since the Great Depression.

But even stripping out inventories, the economy expanded at an annual rate of 2.2 percent, accelerating from the 1.5 percent increase in the third quarter, reflecting relatively strong performance from other segments of the economy.

Business inventories fell only $33.5 billion in fourth quarter after dropping $139.2 billion in the July-September period. The change in inventories alone added 3.39 percentage points to GDP in the last quarter. This was the biggest percentage contribution since the fourth quarter of 1987.

For the whole of 2009, the economy contracted 2.4 percent, the biggest decline since 1946, the first year after the end of World War II.

In the last three months of 2009, consumer spending increased at a 2 percent annual rate, below the 2.8 percent annual pace in the prior quarter when consumption got a boost from the government's "cash for clunkers" program.

In the fourth quarter, consumer spending contributed 1.44 percentage points to GDP.

Consumer spending, which normally accounts for about 70 percent of economic activity, has been held back by the worst labor market in a quarter century.

Business investment in the fourth quarter grew for the first time since the second quarter of 2008 as the drag from the troubled commercial real estate was offset by robust spending on equipment and software.

Business investment rose at a 2.9 percent rate after falling 5.9 percent over the previous three-month period.

The growth of spending on new home construction braked sharply in the fourth quarter to an annual rate of 5.7 percent from an 18.9 percent pace in the third quarter. Home building has received a lift from a popular tax credit for first-time buyers, but recent data have hinted at some weakness starting to creep in.

Export growth outpaced imports, leaving a trade gap that contributed half a percentage point to GDP growth in the last quarter.

Separately, employment costs in the United States rose 0.5 percent in the fourth quarter, Labor Department data showed.

Analysts polled by Reuters had expected the Employment Cost Index to increase 0.4 percent in the three months ending in December 2009, after it inched up an unrevised 0.4 percent in the prior quarter.

Wages and salaries, which make up about 70 percent of compensation, and benefits were both up 0.5 percent, the Labor Department said.

**********************************

CARL is going to hate this.

[Mint]

"Wow, great number. It's very solid and gives us a running start into the second half of the year when we can't rely on government stimulus," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

"That's part of the plan, to get us moving as fast as possible so when life support is removed we'll have a pulse."

People are delusional if they think this can last without government & the fed continually injecting the astronomical sums they have into the economy.

[Verily]

"Wow, great number. It's very solid and gives us a running start into the second half of the year when we can't rely on government stimulus," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

"That's part of the plan, to get us moving as fast as possible so when life support is removed we'll have a pulse."

People are delusional if they think this can last without government & the fed continually injecting the astronomical sums they have into the economy.

Do we need that chart from last quarter that showed that government spending accounted for like a fifth of the GDP growth?

[Swing low, sweet chariot. Comin' for to carry me home.]

"Wow, great number. It's very solid and gives us a running start into the second half of the year when we can't rely on government stimulus," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

"That's part of the plan, to get us moving as fast as possible so when life support is removed we'll have a pulse."

People are delusional if they think this can last without government & the fed continually injecting the astronomical sums they have into the economy.

Do we need that chart from last quarter that showed that government spending accounted for like a fifth of the GDP growth?

and what about the other four fifths?  this economy has a lot more momentum than can be attributed to government intervention.  and this 5.7% growth still included a slight draw on inventories, once the inventory rebound occurs, it will lead to even more growth

[rob in cal]

I've got to stop spending so much time on gloom and doom websites. By their reckoning, there was supposed to be food riots by last fall, and other indicators of the end of the world as we know it.

[Bo]

Good news. Let's hope the economy is able to sustain this kind of growth.

[Swing low, sweet chariot. Comin' for to carry me home.]

I've got to stop spending so much time on gloom and doom websites. By their reckoning, there was supposed to be food riots by last fall, and other indicators of the end of the world as we know it.

The irony is that those who oppose the Federal intervention over the last year admit that allowing the banks to fail would have induced an immediate depression.  Their argument is that the intervention is simply going to make the depression longer and worse.

But I am more than willing to run the risk for a longer and deeper depression if it gives us a chance to avoid one altogether.  We really screwed things up by allowing the lending laws to lend money to those who could not afford it.  Our laws and regulations were asleep at the wheel.  But now that we have awoken, I am more than willing to mortgage the future in order to have the slightest chance to avoid another depression.  And at this point, I think we have a very good chance of avoiding another Great Depression,

The way our society is now structured, I think an economic depression would result in anarchy.

[Bo]

I've got to stop spending so much time on gloom and doom websites. By their reckoning, there was supposed to be food riots by last fall, and other indicators of the end of the world as we know it.

The irony is that those who oppose the Federal intervention over the last year admit that allowing the banks to fail would have induced an immediate depression.  Their argument is that the intervention is simply going to make the depression longer and worse.

But I am more than willing to run the risk for a longer and deeper depression if it gives us a chance to avoid one altogether.  We really screwed things up by allowing the lending laws to lend money to those who could not afford it.  Our laws and regulations were asleep at the wheel.  But now that we have awoken, I am more than willing to mortgage the future in order to have the slightest chance to avoid another depression.  And at this point, I think we have a very good chance of avoiding another Great Depression,

The way our society is now structured, I think an economic depression would result in anarchy.

There would be no need for any bank bailouts if the Glass-Steagall Act had not been repealed in 1999 and if the Fed didn't keep interest rates too low for too long.

[Swing low, sweet chariot. Comin' for to carry me home.]

There would be no need for any bank bailouts if the Glass-Steagall Act had not been repealed in 1999 and if the Fed didn't keep interest rates too low for too long.

those were all just contributing factors, but the main two problems were subprime mortgages and unregulated CDS.

The Glass-Steagall Act would NOT have kept Bearn Sterns, AIG, Freddie, Fannie, and Lehman Bros from going belly up.  Those institutions were not subject to Glass-Steagall.

Glass-Steagall has to do with banks like Citigroup, but Citigroup did NOT run into problems because of proprietary trading, rather they were in trouble because of mortgage and business loans.

First and foremost, we need to mandate that no FDIC banks can make write a mortgage to anyone having a debt/income ratio of greater than 40%.  Period.  Has that been done?!

[Bo]

There would be no need for any bank bailouts if the Glass-Steagall Act had not been repealed in 1999 and if the Fed didn't keep interest rates too low for too long.

those were all just contributing factors, but the main two problems were subprime mortgages and unregulated CDS.

The Glass-Steagall Act would NOT have kept Bearn Sterns, AIG, Freddie, Fannie, and Lehman Bros from going belly up.  Those institutions were not subject to Glass-Steagall.

Glass-Steagall has to do with banks like Citigroup, but Citigroup did NOT run into problems because of proprietary trading, rather they were in trouble because of mortgage and business loans.

First and foremost, we need to mandate that no FDIC banks can make write a mortgage to anyone having a debt/income ratio of greater than 40%.  Period.  Has that been done?!

Yes, but if the Glass-Steagall Act wasn't repealed, all those companies wouldn't have been able to get so large in the first place, and thus even if they did collapse, they would not have taken down the U.S. economy with them. Also, there would have been no housing bubble if the Fed didn't manipulate interest rates in the early 2000s.

[Swing low, sweet chariot. Comin' for to carry me home.]

Yes, but if the Glass-Steagall Act wasn't repealed, all those companies wouldn't have been able to get so large in the first place, and thus even if they did collapse, they would not have taken down the U.S. economy with them. Also, there would have been no housing bubble if the Fed didn't manipulate interest rates in the early 2000s.

Lehman toppled the economy on it's own....it was NOT a bank, it had nothing to do with Glass-Steagall.

The fact that low interest rates helped facilitate loaning does NOT mean that low interest rates were the main problem anymore than the mere existence of banks was the problem.  The problem was lending money to those who had no means to repay the loan.  It created artificial demand that inflated housing prices for everyone buying a house.  When that arrival demand collapse, it collapsed the entire housing market and first took out those who were leveraged long (Bear Sterns, Lehman Bros) and also hurt banks holding the loans (Citibank, BankOfAmerica, etc, etc). 

[phk]

[opebo]

First and foremost, we need to mandate that no FDIC banks can make write a mortgage to anyone having a debt/income ratio of greater than 40%.  Period.  Has that been done?!

This is not an unreasonable band-aid sort of move, but of course the real problem underlying the economic problems was inadequacy of working-class income.  Mandate wages the $20-40/hour range, and there won't be so many defaults.

[CARLHAYDEN]

Economy soars 5.7 percent, fastest in 6 years
 .On Friday January 29, 2010, 9:21 am
By Lucia Mutikani

WASHINGTON (Reuters) - The economy grew at a faster-than-expected 5.7 percent pace in the fourth quarter, the quickest in more than six years, as businesses made less-aggressive cuts to inventories and stepped up spending.

The Commerce Department said on Friday its first estimate put fourth-quarter gross domestic product growth at its fastest pace since the third quarter of 2003. The economy expanded at a 2.2 percent annual rate in the third quarter.

Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 4.6 percent rate in October-December period.

"Wow, great number. It's very solid and gives us a running start into the second half of the year when we can't rely on government stimulus," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

"That's part of the plan, to get us moving as fast as possible so when life support is removed we'll have a pulse."

U.S. stock index futures extended gains on the data, while Treasury debt prices deepened losses. The dollar rose against the yen.

Getting the economy on a sustainable growth track remains one of the key challenges facing President Barack Obama, who on Wednesday outlined a raft of measures to create jobs and nurture the recovery.

Growth was boosted by a sharp slowdown in the pace of inventory liquidation, a factor that could mask the strength of the economic recovery from the longest and deepest downturn since the Great Depression.

But even stripping out inventories, the economy expanded at an annual rate of 2.2 percent, accelerating from the 1.5 percent increase in the third quarter, reflecting relatively strong performance from other segments of the economy.

Business inventories fell only $33.5 billion in fourth quarter after dropping $139.2 billion in the July-September period. The change in inventories alone added 3.39 percentage points to GDP in the last quarter. This was the biggest percentage contribution since the fourth quarter of 1987.

For the whole of 2009, the economy contracted 2.4 percent, the biggest decline since 1946, the first year after the end of World War II.

In the last three months of 2009, consumer spending increased at a 2 percent annual rate, below the 2.8 percent annual pace in the prior quarter when consumption got a boost from the government's "cash for clunkers" program.

In the fourth quarter, consumer spending contributed 1.44 percentage points to GDP.

Consumer spending, which normally accounts for about 70 percent of economic activity, has been held back by the worst labor market in a quarter century.

Business investment in the fourth quarter grew for the first time since the second quarter of 2008 as the drag from the troubled commercial real estate was offset by robust spending on equipment and software.

Business investment rose at a 2.9 percent rate after falling 5.9 percent over the previous three-month period.

The growth of spending on new home construction braked sharply in the fourth quarter to an annual rate of 5.7 percent from an 18.9 percent pace in the third quarter. Home building has received a lift from a popular tax credit for first-time buyers, but recent data have hinted at some weakness starting to creep in.

Export growth outpaced imports, leaving a trade gap that contributed half a percentage point to GDP growth in the last quarter.

Separately, employment costs in the United States rose 0.5 percent in the fourth quarter, Labor Department data showed.

Analysts polled by Reuters had expected the Employment Cost Index to increase 0.4 percent in the three months ending in December 2009, after it inched up an unrevised 0.4 percent in the prior quarter.

Wages and salaries, which make up about 70 percent of compensation, and benefits were both up 0.5 percent, the Labor Department said.

**********************************

CARL is going to hate this.

Please go on the record if you really believe these figures.

I would remind you that the initial third quarter GDP supposed growth rate was 3.5%, subsequently revised to 2.2%.

[Swing low, sweet chariot. Comin' for to carry me home.]

Please go on the record if you really believe these figures.

I would remind you that the initial third quarter GDP supposed growth rate was 3.5%, subsequently revised to 2.2%.

there are ALWAYS revisions to numbers, that is why it is called a PRELIMINARY REPORT, it is largely based on the first two months of the quarter...the 5.7 will end up somewhere between 4.0-7.5.  The market concensus was for 4.7 and the briefing forecast was for 6.5, so this number came within the range of what the market saw happening in the economy.

Relax, there is no grand conspiracy, even if the numbers don't fit the perception of CARLHAYDEN.

[Verily]

"Wow, great number. It's very solid and gives us a running start into the second half of the year when we can't rely on government stimulus," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

"That's part of the plan, to get us moving as fast as possible so when life support is removed we'll have a pulse."

People are delusional if they think this can last without government & the fed continually injecting the astronomical sums they have into the economy.

Do we need that chart from last quarter that showed that government spending accounted for like a fifth of the GDP growth?

and what about the other four fifths?  this economy has a lot more momentum than can be attributed to government intervention.  and this 5.7% growth still included a slight draw on inventories, once the inventory rebound occurs, it will lead to even more growth

Sorry, that was meant to be a positive and show Mint how stupid his comment was.

[Southern Senator North Carolina Yankee]

There would be no need for any bank bailouts if the Glass-Steagall Act had not been repealed in 1999 and if the Fed didn't keep interest rates too low for too long.

those were all just contributing factors, but the main two problems were subprime mortgages and unregulated CDS.

The Glass-Steagall Act would NOT have kept Bearn Sterns, AIG, Freddie, Fannie, and Lehman Bros from going belly up.  Those institutions were not subject to Glass-Steagall.

Glass-Steagall has to do with banks like Citigroup, but Citigroup did NOT run into problems because of proprietary trading, rather they were in trouble because of mortgage and business loans.

First and foremost, we need to mandate that no FDIC banks can make write a mortgage to anyone having a debt/income ratio of greater than 40%.  Period.  Has that been done?!

Yes, but if the Glass-Steagall Act wasn't repealed, all those companies wouldn't have been able to get so large in the first place, and thus even if they did collapse, they would not have taken down the U.S. economy with them. Also, there would have been no housing bubble if the Fed didn't manipulate interest rates in the early 2000s.

Glass Steagal/Gramm Leach Bliley has been overhyped as a cause.

[CARLHAYDEN]

Please go on the record if you really believe these figures.

I would remind you that the initial third quarter GDP supposed growth rate was 3.5%, subsequently revised to 2.2%.

there are ALWAYS revisions to numbers, that is why it is called a PRELIMINARY REPORT, it is largely based on the first two months of the quarter...the 5.7 will end up somewhere between 4.0-7.5.  The market concensus was for 4.7 and the briefing forecast was for 6.5, so this number came within the range of what the market saw happening in the economy.

Relax, there is no grand conspiracy, even if the numbers don't fit the perception of CARLHAYDEN.

So, you are suggesting that the revisions will not bring the 'growth' down to under 4%?

[Nym90]

"Wow, great number. It's very solid and gives us a running start into the second half of the year when we can't rely on government stimulus," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

"That's part of the plan, to get us moving as fast as possible so when life support is removed we'll have a pulse."

People are delusional if they think this can last without government & the fed continually injecting the astronomical sums they have into the economy.

Do we need that chart from last quarter that showed that government spending accounted for like a fifth of the GDP growth?

and what about the other four fifths?  this economy has a lot more momentum than can be attributed to government intervention.  and this 5.7% growth still included a slight draw on inventories, once the inventory rebound occurs, it will lead to even more growth

Tick, tick, tick, tick......

[Swing low, sweet chariot. Comin' for to carry me home.]

Please go on the record if you really believe these figures.

I would remind you that the initial third quarter GDP supposed growth rate was 3.5%, subsequently revised to 2.2%.

there are ALWAYS revisions to numbers, that is why it is called a PRELIMINARY REPORT, it is largely based on the first two months of the quarter...the 5.7 will end up somewhere between 4.0-7.5.  The market concensus was for 4.7 and the briefing forecast was for 6.5, so this number came within the range of what the market saw happening in the economy.

Relax, there is no grand conspiracy, even if the numbers don't fit the perception of CARLHAYDEN.

So, you are suggesting that the revisions will not bring the 'growth' down to under 4%?

it depends on the December numbers....the PRELIM report only takes into account the first 2 months of the quarter, because that's all that is available at the time....next month's revision will have more complete data on Q4 and the month after we get the final number.

there is no grand conspiracy afoot.