The GDP Report

The GDP report that came out last Friday was a disappointment on many fronts.

Here are some details:

• GDP grew at 2.8% in Q4 2011.  This was up from 1.8% in Q3 but below economist forecasts of 3%.
• For the year GDP grew at 1.7%.
• Trade was down in Q4 as the problems in Europe are starting to show signs of affecting the US.
• Government spending dropped 4.6%.
• Private inventories increased 2% which is a huge number which is usually followed by quarters of lower growth as businesses stop spending after they restock.
• Real final sales (GDP-Private Inventories) increased .8% vs. 3.2% in Q3.
• Consumer spending increased 2% in Q4 vs. 1.7% in Q3 and contributed 1.5% to GDP.  Spending came at the expense of savings as the savings rate dropped.
• Business investment increased 1.7% vs. 15.7% in Q3.
• Fed's forecast is for GDP to come in between 2.2% and 2.7%.
• PCIE is at .7% in Q4 vs. 2.3 in Q3 and 3.3% Q2.  Core was 1.1% vs. 2.1% Q3.

The inventory build was what carried GDP last quarter.  The fact that trade is dropping shows that Europe is affecting the US as well.  We shall see if this continues but this was not a great report.