GDP growth in Q4: Good, not great

The nation's gross domestic product -- the value of all goods and services produced -- grew at an annual rate of 2.8 percent in the fourth quarter, the fastest pace since the second quarter of 2010. The good news is that it's up from 1.8 percent in the third quarter, 1.3 percent in the second quarter and 0.4 percent in the first quarter.

The not-so-good news is that analysts were expecting 3 percent growth (some were even calling for 3.5 percent), which is why stocks opened lower after the release.

The real reason why the news is good, not great: Two-point-eight percent growth is very weak for a recovery. Some of the downbeat parts of the report include:

Business spending on capital goods was the slowest since 2009. Companies likely held back on big purchases because of the European debt crisis.

Government spending tumbled 7.3 percent. This was a turnaround from a 2.1 percent increase in Q3 and a nice way to remind those austerity fans that when the government spends less, it creates a drag on economic growth (see: UK).

Rebuilding of inventories accounted for nearly 2 percent of total growth. The restocking of inventories grew at the fastest pace since the third quarter of 2010, but restocking is temporary, which could mean a downturn in the first quarter.

Consumer spending rose 2.0 percent. Sure, it's up from 1.7 percent in Q3, but it comes at a cost to the personal savings rate, which slipped from 3.9 percent to a 3.7 percent rate in Q4.

I'll take 2.8 percent growth, especially when compared to contraction or even slower growth, but we really need to see growth above 3 percent for a few quarters in a row to create more jobs and to increase confidence in consumers and businesses.

[BellaRossi]

The whole system is way to mathematically complicated we really don't know what any of the data REALLY means.


Bella Rossi

http//:www.mforums.org

[sandiegopete]

This story does not state whether the figures are adjustged for inflation. I don't know about the rest of you but when I go to the store I notice that the price of almost everything today is higher than it was a year ago. What is the real GDP per capita?

[smittyc]

Historically yearly GDP needs to be 2% for minimal growth. Worse the positive is skewed due to certain sectors rebounding but leaving those needing jobs with still no where to go. The biggest cause is the increase in those with little education. Nationally and locally the education system is run by unions and the last few decades education has focused on social issues, not education. The results cannot be defended, our education system and the unions that run it are a failure. Our government and people spend more on education per pupil then anywhere else on the globe, the teachers unions pocket the money and blame the parents. Getting the unions out of education and evaluating on merit is the only hope for our young peoples future.

[retm-w]

So mr. education expert, we should just fire all the teachers and let clowns like you do the teaching for minimum wage no benefits. Bet you wouldn't last a day in the classroom.

[fredisalive]

the only thing that keeps the GOP in contention is the low levels of education among the electorate! Otherwise this party is toast!

[realtimecoffee]

Then wouldn't you think the NEA would do a much better job of educating?

[realtimecoffee]

I know Hypno, I was just repponding to his theory that stupid people vote Republican. If that were true then the Democrats should be doing everything they could to graduate smart discerning young men and women. (I actually don't think either party has a lock on the stupid vote)

[boathead1]

Nice try, but 2.8 constitutes only the fourth quarter of 2011. How convenient that this period straddles the holiday spending season. Rather than cherry picking this good quarter, how about comparing the real 2011 average GDP of 1.7% to the real 2010 GDP of 3.0%. Simple question - If the US economy is really in recovery, then why is GDP growth trending downward 43%?

[boathead1]

Nice try, but 2.8 constitutes only the fourth quarter of 2011. How convenient that this period straddles the holiday spending season. Rather than cherry picking this good quarter, how about comparing the real 2011 average GDP of 1.7% to the real 2010 GDP of 3.0%. Simple question - If the US economy is really in recovery, then why is GDP growth trending downward 43%?