This is the advanced Q4 GDP and it's a blow out. GDP increased 5.7% in Q4 2009.
Party on Garth! This is an advanced report, so there might be significant revisions. Recall Q3 2009 GDP originally came in at 3.5% and was revised down to 2.2%.
The acceleration in real GDP in the fourth quarter primarily reflected an acceleration in private inventory investment, a deceleration in imports, and an upturn in nonresidential fixed investment that were partly offset by decelerations in federal government spending and in PCE.
Just a little bit, investment is a blow out at 39.3% increase!
One must wonder how much of the business investment credit from the Stimulus, which was a 50% bonus depreciation, and allows a 50% write off on business investments in the first year, is the reason for this private inventory investment acceleration.
So how did GDP do for the year? -2.4%. The worst since 1946.
Real GDP decreased 2.4 percent in 2009 (that is, from the 2008 annual level to the 2009 annuallevel), in contrast to an increase of 0.4 percent in 2008.
Let's look at our GDP equation:
Y=GDP, C=Consumption, I=Investment, G=Government Spending, (X-M)=Net Exports.
Here is the break down of each as they added to overall Q4 GDP:
- C = 1.44%
- I = 3.82%
- G = -0.02%
- X = 1.9%
- M = 1.4%
For Q4 GDP we have in percent change from last quarter:
- C = 2.0%
- I = 39.3%
- G = 0.1%
- X = 18.1%
- M = 10.5%
While private investment will make the headlines, the trade deficit numbers are very encouraging. Exports greatly increased, best in 30 years, and imports ...not so much. I wonder if buy American clauses in the Stimulus, weak as they are, had any effect.
Some good news on personal income:
Current-dollar personal income increased $119.2 billion (4.0 percent) in the fourth quarter, compared with an increase of $35.1 billion (1.2 percent) in the third.
I'll bet dollars to donuts this advanced GDP report is revised down at a later date. The reason is the breakdown of investment. Any reporting discrepancy in inventories, bam, a sharp revision. Here is the GDP contribution breakdown of Gross Private Domestic Investment (I):
- Fixed investment - 0.43%
- Nonresidential - 0.29%
- Structures - -0.52%
- Equipment & Software - 0.81%
- Residential - 0.14%
- Change in private inventories - 3.39%
So clearly it is the private inventories which drove this number. Minus that (5.7% - 3.39%) GDP would have been 2.3%.
Let's hope the export numbers are real, that's encouraging.