America’s economy galloped ahead in the final quarter of 2009, expanding at a better-than-expected 5.7% rate, according to the first estimate from the Commerce Department. (I hasten to add that it was not a surprise to CC founding contributor Justin Fox who’s been alerting readers to the strong likelihood of an eye-popping 4th quarter performance.) The robust rate, even if it holds up under revisions, won’t be enough to put full-year 2009 in the plus column. But it’s welcome news nonetheless.
Here is a smart (and sobering) take on today’s numbers from Ian Shephardson at High Frequency Economics:
“While the GDP number was close to our expectation we are mildly pleasantly surprised by the details. Inventories accounted for 3.4 percentage points of GDP growth, a bit less than the 4pp we expected. That meant final sales rose 2.2%, rather than the 1.5% we forecast. The key upside surprise is in capital spending on equipment and software, up 13.3%. We can’t see where this comes from and think a downward revision is likely but for now it is
the number. Net trade was better than we expected, adding 0.5pp to growth; consumption was as expected, up 2.0%, but we are surprised govt spending fell 0.2%. That’s not what the economy needs now. Bulls will gloat but 2%-ish Q1 GDP will be a reality check.”