This morning, we learned that fourth quarter GDP rose 5.7%, much better than expectations of 4.7%. Nominal GDP was only 0.3% above estimates as the price deflator rose only 0.6%, which was 0.7% less than expected. Nominal GDP rose 6.3% vs estimates of 6%.
Personal Spending rose 2%, which was 0.2% above forecasts. Inventories fell by only $33.5 billion, down from the $139 billion drop in the third quarter and $160 billion fall in Q2. This added 3.4% to GDP.
Real final sales rose by 2.2% and I’m told that takes out the impact of inventories. Spending on equipment and software rose by 13.3% and added 0.8% to GDP (I bought a new computer, so I contributed to GDP – yay!).
Spending on residential construction rose by 5.7%, the 2nd quarter in a row of gains but nonresidential structures fell by 15.4%. Trade added 0.5% to GDP as exports rose a whopping 18.1% while imports were up just 10.5%. Government spending fell by 0.2% but was led by a 3.5% fall in defense. Nondefense spending rose by 8.1%.
Net-net, this was a great headline print, and it sent futures soaring this morning. However, there a few things to remember …
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GDP growth was helped out by lower than expected inflation.
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GDP looks backward, so this is old news. What will 2010 bring?
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The economy is still fairly weak. GDP growth was driven by the inventory changes.
Bottom line: in an oversold market, the headline is the focus. It will spark a rally. The question is, will the rally last?
Related Posts
- Wednesday Charts: Is This Dollar Rally for Real? (08/26/09)
- Thursday News Roundup (03/26/09)
- Monday Charts and News (03/30/09)
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