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Kimberly Amadeo

Economy Continues to Strengthen

By January 29, 2010

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The economy ended 2009 with a whopping 5.7% growth rate for the fourth quarter. Before you pop the bubbly, you must realize a few things:

  1. This is an advance estimate. It could drop a point or two by next month, when the second estimate comes out.
  2. The growth is based on businesses stocking up low inventory, which added 3.39 points.
  3. Real estate and consumer spending actually slowed in Q4. These are needed to sustain any lasting recovery.


The economy would have only grown 2.3% without the inventory adjustment, according to econo-blogger Calculated Risk.

What It Means to You

Even a 2.2% growth rate means the economy is technically out of recession. Recessions are usually defined by two consecutive quarters of negative GDP growth. Job losses will continue, however, since growth needs to be 3% or more for businesses to add jobs. For a history of all GDP reports since 2007, see GDP Current Statistics. (Source: GDP News Release)

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Comments

January 30, 2010 at 3:55 pm
(1) Asif says:

Well I realy agree with you, Although Wolrds Largest GDP grew at the fastest pace in Six years still there is fear in market and Roubini also said ” U.S. Growth `Dismal and Poor’ Predicts Second-Half Slowdown, And Kimberly your Second point is realy interesting addidion of 3.39 Points.

I also realized that dollar was not happy at 8:30 Est when news was announced. It seemed something is forcing Dollar for strongness.And also Dollar didnt covered much distance immediately means Second-Half is slow.

January 31, 2010 at 12:38 pm
(2) Kimberly Amadeo says:

Hi Asif,

The euro dropped due to concerns about Greece possibly going bankrupt, like Iceland and Dubai, without EU support. Also, some people think the strong GDP report means the Fed will raise interest rates this summer, which would make the dollar a better investment.

However, I don’t think the Fed will raise rates this year. It has many, many other ways to mop up excess liquidity before raising rates. See Fed Exit Plan.

Kimberly

February 3, 2010 at 4:22 pm
(3) Asif says:

yes I Agree with you, euro dropped due to Greece but over all Dollar is strong in Currency Basket for 16 major currencies,

But this continue Recovery would force Fed to increase rates as on this firday more speculation could grow on PayRoll Date, same on 8 December 2009

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