Inventories still the growth story in Q4

Much of growth in the fourth quarter of 2009 was due to businesses restocking their inventories.

By , Guest blogger

  • close
    Much of growth in the fourth quarter of 2009 was due to businesses restocking their inventories.
    View Caption

The Bureau of Economic Analysis has released its third look at the economy in the fourth quarter of 2009. The economy grew rapidly in the quarter, but slightly less than previously reported: the new estimate is a 5.6% pace of real GDP growth vs. 5.9% in the prior estimate.

As usual, I think the best way to understand this report is to see what sectors contributed the most or least to reported growth:

Almost two-thirds of the growth reflects businesses restocking their shelves and warehouses: inventories accounted for 3.8 percentage points of the overall 5.9% of growth.

Recommended: Business

Consumer spending grew at a modest 1.6% pace and thus added 1.2 percentage points to overall growth (consumer spending accounts for about 70% of the economy and 70% x 1.6% = 1.2%, allowing for some rounding). That’s down from the previous quarter, when cash-for-clunkers boosted car purchases. Housing investment also slowed, again in the wake of earlier efforts–the tax credit for new home buyers–that had boosted growth in the third quarter.

Business investment in equipment and software showed signs of life, growing at a healthy 19% pace. That added 1.1 percentage points to growth, more than half of which was offset by the ongoing decline in non-residential construction.

Government spending fell slightly during the quarter. Stimulus efforts boosted non-defense spending by the federal government, but that increase was more than offset by a decline in defense spending and in state and local spending.

Add/view comments on this post.

------------------------------

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger,click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...