In its second estimate for the fourth quarter of 2011, the Bureau of Economic Analysis has announced an upward
revision of gross domestic product to an annualized level of 3.0 percent. That compares with the first estimate last month of 2.8 percent. This was the best showing of a very weak year. It indicates a steadily but slowly improving trend over the past four quarters and marks the 10th quarter of growth since the Great Recession began in December 2007. GDP growth in the third quarter of 2011 was 1.8 percent.
The fourth-quarter revision puts GDP growth for the entire year at an anemic 1.7 percent. Growth in 2010 was 3.0 percent. Forecasts for 2012 are running between 2.0 percent and 2.6 percent, however, some analysts are becoming more optimistic. They have been cautious after having been burned by optimistic forecasts for 2011 as high as 5 percent at this time last year. Those obviously did not pan out. The fourth-quarter GDP figure for 2011 will be revised a final time in March.
“We’re continuing to see moderate economic expansion driven by an improvement in the labor market,” said Conrad DeQuadros, a senior economist at RDQ Economics LLC in New York. “Even with growth at 3 percent, the Fed remains concerned about the outlook with the unemployment rate high, and that’s the driver of their highly accommodative monetary policy.”
Meanwhile, the Federal Reserve's eight-times-a-year "beige book"
appeared today, reporting:
Reports from the twelve Federal Reserve Districts suggest that overall economic activity continued to increase at a modest to moderate pace in January and early February. [...]
Reports of consumer spending were generally positive except for sales of seasonal items, and the sales outlook for the near future was mostly optimistic.
A key number in today's report was final domestic sales—GDP less the change in private inventories—which was revised from a very weak 0.8 percent to 1.1 percent. Personal consumption expenditures rose to 2.1 percent in the fourth quarter, up from 0.7 percent in the third. But a good deal of this came out of personal savings, not from increased earnings. The savings rate has been on a downward trend for five quarters, and now stands at 4.5 percent of income.
Another key number was the gain in private inventories, what companies build in anticipation of new sales. That accounted for 1.88 percent of the change in the fourth-quarter change in real GDP, after subtracting 1.35 percentage points from the third-quarter change.
Among other inflation-adjusted (real) numbers in the report:
• Durable goods sales increased 15.3 percent, compared with an increase of 17.2 percent in the fourth quarter of 2010.
• Exports of goods and services increased 4.3 percent in the fourth quarter, compared with a real increase of 7.8 percent in the fourth quarter of 2010.
• Imports of goods and services increased 3.8 percent, compared with an decrease of 2.3 percent in 2010. (Imports are subtracted from GDP.)
• Federal government consumption expenditures and gross investment decreased 6.9 percent in the fourth quarter. National defense decreased 12.1 percent, compared with a decrease of 5.9 percent in the fourth quarter of 2010. Nondefense increased 4.4 percent, compared with an increase of 3.1 percent in the final quarter of 2010. State and local government consumption expenditures and gross investment fell 2.5 percent, compared with a decrease of 2.7 percent a year ago.
As frequently noted here in the past, including as far back as nine years—What the GDP Doesn't Do—gross domestic product is only one measure of the national economy. It has its weaknesses and strengths. But, despite efforts to improve it, all anyone has come up with are supplements, not a replacement.