GDP Rose in 4th Quarter 2009

The Bureau of Economic Analysis has announced the estimate of Gross Domestic Product for the final quarter of last year:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 5.7 percent in the fourth quarter of 2009, (that is, from the third quarter to the fourth quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.2 percent.

The Bureau emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4). The “second” estimate for the fourth quarter, based on more complete data, will be released on February 26, 2010.

The increase in real GDP in the fourth quarter primarily reflected positive contributions from private inventory investment, exports, and personal consumption expenditures (PCE). Imports, which are a subtraction in the calculation of GDP, increased.

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.

Motor vehicle output added 0.61 percentage point to the fourth-quarter change in real GDP after adding 1.45 percentage points to the third-quarter change. Final sales of computers subtracted 0.03 percentage point from the fourth-quarter change in real GDP after subtracting 0.08 percentage point from the third-quarter change.

There’s a “cup half empty” and a “cup half full” way to view these figures.

The good news is that 5.7% is a very solid growth rate, an expanding economy is better than a contracting one, and things, e.g. motor vehicles, that were subsidized did well. The bad news is that things that weren’t subsidized, e.g. computers, contracted, which still shows weakness. I should also point out that strong growth in the face of declining employment indicates rising productivity. As long as productivity is rising, outputs are increasing, and the future is as uncertain as it is will we see an increase in employment?Update