Economy gets its groove back?

In the fourth quarter of 2009, the economy grew at its fastest clip in six years. Not exactly “Happy Days are Here Again,” but better than it was. From WaPo:

The U.S. economy roared ahead in the final months of 2009, growing at its fastest rate in six years, as corporate America stopped slashing its inventories and again started to invest for the future.
Gross domestic product, the broadest measure of economic activity, rose at a 5.7 percent annual rate in the fourth quarter, the Commerce Department said Friday. That is the highest pace of growth since 2003, and it constitutes strong proof that the recession reached its end earlier in 2009. It was also a surprisingly positive result, well above the 4.6 percent rate of GDP growth forecasters had expected.

But there remained reason to doubt how strong the economic recovery will be in 2010. The biggest component of the GDP growth was a steep drop in the pace at which businesses were cutting back on their inventories. Firms reduced their inventories by $33.5 billion in the fourth quarter, compared with $139 billion in the third. In the math of GDP, which attempts to capture the value of goods and services produced within U.S. borders, that added 3.4 percentage points to overall growth.

The down side is that inventories are unlikely to provide a similar boost to growth in future quarters. Now that companies are not cutting back on the goods on their warehouses and store shelves in large numbers, the way they were during the depths of the recession, inventories will not add much to growth in the coming quarters unless businesses decide they cut back too far during the downturn and decide to actively rebuild their inventories.

There was also a significant boost to growth from businesses investing again in equipment and software. They cut back dramatically on capital spending during the depths of the recession, and now such spending seems to be clawing back, rising at a 13.3 percent annual rate in the fourth quarter. That contributed 0.8 percentage points to overall growth.

American consumers also continued to increase their spending, at a 2 percent annual rate. Because personal consumption is the largest piece of overall economic activity, that was enough to add 1.4 percentage points to total GDP.

33 comments Add your comment

sam

January 29th, 2010
1:25 pm

Jess

January 29th, 2010
1:25 pm

Whew! now we don’t have to throw away $150,000,000,000 on another stimulus plan.

Turd Ferguson

January 29th, 2010
1:32 pm

One way to increase profits is to reduce the expense ratio. Expect more layoffs during the 2010 year. And as a shareholder I expect a return!

jconservative

January 29th, 2010
1:35 pm

On the economy it is still a wait and see.

ctucker

January 29th, 2010
1:37 pm

Jess, suppose it was the first stimulus plan that helped the economy get back on its feet?

ctucker

January 29th, 2010
1:39 pm

I should have added: And a second would help even more? I don’t know that it would, but most economists agree the first stimulus pkg helped

ctucker

January 29th, 2010
1:40 pm

yes, jconservative, very much so. Unemployment is still much too high

Kevin

January 29th, 2010
1:50 pm

Let’s hope the economy is getting back on track. The GDP growth number is impressive.

Re: the stimulus. It’s too early to tell if it worked. But, at a cost of $787 billion (or a cost of $2,500 for every single man, woman and child in this country), is it good enough to say the plan “helped”. It’s irresponsible to spend that kind of money and it only “help”.

Also, too many of the stimulus projects have been a complete and utter waste of money. Too many have nothing to do with stimulating anything. In my opinion, that’s the real issue.

sam

January 29th, 2010
1:55 pm

there is hope for us..problem employment always lags. it’l 2011 at the earliest before its back to a decent level…the census takers will help for a little while though…

Ragnar Danneskjöld

January 29th, 2010
2:15 pm

If federal spending were not a significant component of GDP calculation, the rise in GDP might be meaningful. As Ms. Tucker suggests in her note @ 1:36, the rise in GDP likely reflects no true recovery, just an increase in federal spending. Two other bits of cold water for those of us grasping for some sign of improvement: (1) the good news of the last two quarter numbers were gravely overstated, ultimately revised downward; (2) the prior quarter numbers may have reflected some optimism that the leftist agenda would abate, and that taxes and regulations would be minimal during 2010 due to the depression, a hope surely dissipated by the state of the union address the other night.

wyld byll hyltnyr

January 29th, 2010
2:28 pm

Now, Cynthia why have you blocked ol\’ Wyld Byll from posting. Not very neighborly, I\’d say. One is left to surmise that you believe your arguments and opinions stand best when not challenged by one having meaningful intellect.

That said. Porkulus is to economic activity what candy is to a child\’s energy level. Obama dumped a lot of money into the economy and that money fueled some activity, but it did not build the infrastructure of a recovery. Things will get worse (remember Obama\’s green shoots) before they get better.

joan

January 29th, 2010
2:33 pm

I would truly hope that we cannot claim to have stabilized the economy with a true 16% or more unemployment. If we settle for that, then the welfare payments we can look forward to in future will surely put this country on its knees.

ctucker

January 29th, 2010
2:33 pm

Ragnar Danneskjold, What did you hear about taxes in the state of the union? The only thing I heard was the promise of more tax cuts. Remember, there was a massive cut in the stimulus package.

ctucker

January 29th, 2010
2:39 pm

Kevin, Part of that $787 billion was a $282 billion tax cut. And part of it hasn’t been spent yet. So it’s not $2500 per American.

ctucker

January 29th, 2010
2:56 pm

Kevin, My last response to you should have added the words “spent already.”

Conservative_American

January 29th, 2010
3:17 pm

Ms. Tucker’s enthusiasm and support for this inept president and Congress befuddles me. We are still hemorrhaging jobs; health insurance is still overpriced for most Americans (if they can even buy it given preexisting conditions) and is escalating at twice the core inflation rate; we’re 13+ trillion dollars in the red; and the president is spending money on stupid projects, like high-speed choo-choo trains to carry a handful of would-be passengers. Where in the world does Ms. Tucker see progress in our economy? Hello? Anyone home, Ms Tucker?

TnGelding

January 29th, 2010
3:31 pm

Happy days ARE here again! The GOP says the stimulus hasn’t worked and then credits it with the increase. They can’t have it both ways.

Great meeting with the president today, by the way. I hope everyone was sincere.

StJ

January 29th, 2010
3:31 pm

Premature to say the economy has turned around…that’s just one quarter of a year. If we can sustain the growth and start adding [non-government] jobs instead of losing them, then the answer would be more definitive.

But don’t hold your breath. The Democrats are bent on “penalizing” the rich, and as long as you’re hanging that threat over their heads, they have no incentive to invest in anything. Any reward so gained would just be taken away from them via punitive taxation.

Carter is a Fool

January 29th, 2010
3:39 pm

Conservative_American — Why are you befuddled by Ms. Tucker’s support and enthusiasm for this inept president? She is being perfectly in character and true to her leftist leanings.

I am signing off. The moonbats that love her rantings and cheer for the inept one while he impersonates Captain Smith on the Titanic are not worth my time. Her opinions are designed to inflame the readers of this rag and build web traffic. The loonier the better. I have made the decision not to comment or read her racial diatribes, her kool-aid inspired rants and her poor insight into the world along with her cut and paste columns.

I will instead enjoy looking at Michael Ramirez’s editorial cartoons on Investor’s Business Daily and read some real thought provoking insight into the economy and politics on that site including the column from the left point of view.

I do wish her well with her adopted daughter and will pray for her to have all of the benefits and opportunities that are available in this – The greatest country on God’s green earth.

Jimmy62

January 29th, 2010
3:47 pm

Notice what’s missing? Any shred of evidence that this positive movement had anything to do with Obama (and Bush before him) throwing billions down the toilet in the name of the oft-disproven Keynsian economic theories.

Chris Broe

January 29th, 2010
4:08 pm

This 5.7% growth last quarter will force the feds to raise interest rates.

Scott

January 29th, 2010
4:28 pm

See that is the problem Cynthia. You know NOTHING about business, much like most of Congress and certainly the current Admin. The GDP went up because we replaced depleted inventories. And we did it with a workforce that was short-shifted and an underutilized employment. The problem is…with all of the unemployed people and the fact that people are till on edge, who is going to BUY this inventory??? Again, look at the ENTIRE situation and think CRITICALLY….We have one piece of good news while we all know that will lead to bad news over the rest of the year as people will not buy anything. I guess that after taking credit for this pc of news(like he did today), he will go ahead and blame Bush again when next quarters’ numbers come out, right? Come on now…we all know that if this was Bush in the office, you libs would be screaming right now. Why are we holding this guy to a completely different standard?

Zibby

January 29th, 2010
5:01 pm

All Obozo did was pour some gasoline on ashes and set it afire. Once the gasoline burns off you’re still just left with ashes, which sums up how the economy in 2010 will be. The country would already be out of this recession had it not been for the hamfisted, wrongheaded liberal jibberjabber that is holding this country hostage… I didn’t know anyone was still reading the Washington Post, Cynthia – do you get it for free or are you they’re last paying customer?

[...] Commerce Department reported some more good news on the economy. The U.S. economy grew 5.7 percent in the fourth quarter of 2009, crushing through previous expectations. This marked the fastest [...]

Michael H. Smith

January 29th, 2010
5:14 pm

The economy is a long ways from getting its’ groove thing back, comrade Cynthia. The uptick in the GDP doesn’t tell the entire story. In the midst of losing jobs, American worker productivity rose in ‘09. Additionally, inventories will soon need replenishing. Oddly, the Stock Market is sending a mixed single in as much on average as the market goes in January, so goes the market the rest of the year based on historical data.

As one who generally see the glass half full, I was hoping the good from less American workers producing more with inventories dwindling would in and of itself spur a hiring spree regardless of current politics. Hopefully, this January’s down market is one of those few that breaks with the traditional average trend. Members of Congress should work to remove uncertainty to relieve market jitters and put those earned job creation tax credits, investment job creation tax incentives in place quickly. This is one area where the Comrades and the Conservatives alike should be able to find common ground to promote the general welfare of the nation in serving prosperity for all U.S. citizens.

Scout

January 29th, 2010
5:22 pm

Ms. Tucker:

You sure are putting out the threads today ………see below an answer to one of your questions on a previous thread ………..

Scout
January 29th, 2010
12:35 pm
There is a lot of “usurpation” of the Constitution going on ……… by all three branches of our government !

ctucker
January 29th, 2010
12:47 pm
Was that “usurpation” going on under Bush-Cheney?

To Ms. Tucker:
Yes – usurpation by Republicans and Democrats! That’s why I am a conservative and belong to no party. Our federal government is out of control.

The 10th Amendment needs to be enforced and sooner or later (and some way or another) the “people” are going to do it.

not a CT fan

January 29th, 2010
5:38 pm

CT, Have you asked your freinds back home in Alabama if they are optimistic abour our economy? It’s easy to be optimistic when you have a job and are surrounded by others who also have their job. I am fortunate to still have my job, but many of my friends & neighbors have been unemployed for months. I’m not expecting things to get much better any time soon.

Jess

January 29th, 2010
6:12 pm

Cynthia,

Actually, I cannot recall a recession that didn’t end… most of them witout any government tampering.

JOHN ODD OWL

January 29th, 2010
8:25 pm

Right wing Republicanism = Cynical pessimism, perpetual denial. There’re a lot of dull knives in this drawer.

JOHN ODD OWL

January 29th, 2010
9:50 pm

President Obama took on the “political talking points” of the extreme right wing, neo-con Repuklican minority House members tody. He destroyed everyone of them. The Repuklican minority members of Congress are rebels without a plan.

Workingmom

January 29th, 2010
11:32 pm

“Gross domestic product, the broadest measure of economic activity, rose at a 5.7 percent annual rate in the fourth quarter,”

Thats a good thing. But it’s a %. We were at rock bottom. Inventory was nill, Christmas was coming. Of course things were going to tick up. Also in Dec another 85,000 Americans lost their jobs. Real unemployment is at 17%. We need JOBS.

And on the stimulus………..we have to pay China back at some point.

P. Gramm

January 30th, 2010
10:31 pm

You Americans are a nation of whiners.

[...] News The U.S. economy grew 5.7 percent in the fourth quarter of 2009 The Commerce Department reported some more good news on the economy. The U.S. economy grew 5.7 [...]