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Kimberly Amadeo

The Truth Behind the Q4 GDP Report: Growth Was 1.8%

By March 27, 2010

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Final results for economic growth for fourth quarter 2009 are in. The economy grew 5.6% - down slightly from the first two estimates of 5.7% and 5.9% growth. Most of this increase - in fact, 3.79% - was from businesses as they restocked low inventory.  This is to be expected at this stage of the business cycle for an economy coming out of a recession.  (Source: Bureau of Labor Statistics Q4 GDP Report)

So, how much did the economy really grow last quarter? Subtract 3.79% from 5.6% to get the answer - 1.8%.

Econo-blogger Calculated Risk points out that:

Changes in private inventories are transitory (only lasts a few quarters at the start of a recovery).

He goes on to note that spending on personal consumption and residential investment were both revised down in Q4.

What It Means to You

Even a 1.8% 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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May 24, 2010 at 4:58 pm
(1) benevolent dictator says:

If government input to GDP in 2007 was 18% and now it is 28%, would this negate real private sector growth, hence contraction? 1.8% – (28%-18%)=10%, 10% of GDP($13.5 trillion)=$1.35 T of government increased input at the expense of debt and/or dollar debasement. The feds financed our posterity into our servitude=future fiscal oppression. The US has a 30+ year trend of a credit account deficit-exportation of wealth while symptoms are mitigated by foreigners buying our debt, an ever increasing bad debt (entitlement/benefit/welfare spending) and a greater government input to our GDP via dollar debasement and debt creation. How is this trend reversable? We are a dead-Greece walking.

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