U.S. GDP Growth

January 28, 2011

U.S. real GDP growth strengthened to 3.2% annualized (saar) last quarter from 2.6% in the third quarter and 1.7% in 2Q.  GDP was 2.8% higher than in the final quarter of 2009 versus a net rise of just 0.2% between 4Q08 and 4Q09.  Real final sales expanded by a robust 7.1% saar, with advances of 8.5% in exports, 4.4% each in personal consumption and non-residential investment, and 3.4% in residential investment.  Because of a plunge in imports of 13.6% saar, net foreign demand augmented economic growth by 3.44 percentage points (ppts) and reduced the rise of the GDP price deflator to merely 0.3% saar.  The personal consumption price deflator advanced 1.8% saar last quarter, but the Fed’s preferred core consumption deflator only firmed 0.4% saar and was just 0.8% above its year-earlier level.  Inventory destocking subtracted 3.7 ppts from the fourth-quarter GDP growth rate but bodes well for growth in the current first quarter of 2011.

Other measures of inflation released today were benign.  The employment cost index and its two components, regular pay and benefits, each went up only 0.4% last quarter.  The ECI was just 2.0% higher than in 4Q09, and regular pay posted an on-year advance of 1.6%.  The GDP price deflator in calendar 2010 increased 1.0%, little different from a 0.9% rise in 2009 and less than half the 2.2% advance of 2008.  The consumption deflator was 1.7% last year, matching the average pace of the two previous years.

U.S. real GDP rose 2.9% in calendar 2010, offsetting the 2.6% drop in 2009.  Growth averaged 0.1% per annum over the past three calendar years and 1.0% per annum during the five years from 2006 to 2010.  In the year to 4Q10, U.S. growth of 2.8% surpassed British growth of 1.7% but was less than a third as strong as China’s 9.8% rate of economic expansion.  U.S. average growth of 2.9% in calendar 2010 also fell short of Germany’s 3.6%.

Over the two years between 4Q08 and 4Q10 — the Obama years — real GDP rose 1.5% per annum, a shade less than the 1.7% per annum pace sustained over the eight Bush43 years.  Jobs grew 0.4% per annum, bettering the 0.3% rate of contraction under President Bush.  Core CPI inflation was 1.3% per annum, down from a 2.1% pace when Bush43 was president.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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