Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19
Silver Is Cheap – And Getting Cheaper - 7th Oct 19
Stock Market Back to Neutral - 7th Oct 19
Free Market Capitalism: Laughably Predictable - 7th Oct 19
Four Fundamental Reasons to Buy Gold and Silver - 7th Oct 19
Gold and Silver Taking a Breather - 7th Oct 19
Check Engine Warning Light ECU Dealer Diagnostic Cost - Land Rover Discovery Sport - 6th Oct 19
Natural Gas Reloads For Another Price Rally - 6th Oct 19
Understanding and Purchasing different types of Plastic Building Materials Online - 6th Oct 19
Craig Hemke: Ignore the Elliott Wave “Buffoons” Calling for a Gold Crash - 6th Oct 19
Stock Market 6 Month Trend Forecast Conclusion - Video - 6th Oct 19
The True Causes Behind the Yield Curve Inversion and Gold - 5th Oct 19
Strategies on how to be a Successful CFD Trader - 5th Oct 19
Gold Stocks Correction Underway - 5th Oct 19
Climate Change When the Levee Breaks - 5th Oct 19
Federal Reserve Bank ‘Guarantees’ Dow Will Not Sink Below 26k - 5th Oct 19
The Russell and Transportation Tell A Completely Different Stock Market Story - 4th Oct 19
Confidence Drives the Economy and Trump’s Trade War Is Killing It - 4th Oct 19
ADL Predicts Crude Oil Prices Will Fall Below $40 - 4th Oct 19
Investing Money? Why You Need a Reputable Accountant - 4th Oct 19
Stumbling Manufacturing and Rising Gold – Now or Later? - 4th Oct 19
Silver Eyes Fourth Quarter Rebound - 4th Oct 19
Gold Price Forecast to Exceed $10,000/Ounce - 3rd Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

US GDP: The breakdown

Economics / US Economy Jan 31, 2010 - 12:08 PM GMT

By: Vishal_Damor

Economics

Best Financial Markets Analysis ArticleU.S. government declared its fourth quarter GDP which grew at a 5.7% annual rate. This number didn’t result from actual economic growth per se, but from a slower rate of decline of inventories.  Inventory numbers that were falling at a slower rate acccounted for approximately 3.4% of the 5.7% GDP growth at the end of 2009. There has been a decrease in inventories for seven quarters in a row. Private businesses decreased inventories $33.5 billion in the fourth quarter, following a bigger decrease of $139.2 billion in the third quarter and an even biggerdecrease of $160.2 billion in the second.


Some salient points from the GDP release (as compiled by Haver analytics)

  • The driver to last quarter’s growth was inventories. The 3.4 percentage point contribution from inventory accumulation was necessitated by vigorous decumulation dating back to 2005. It had reduced desired inventory levels too far below demand even though sales were then declining.
  • Improvement in the foreign trade deficit also contributed one half of a percentage point to growth last quarter as exports remained strong. The 18.1% rate of increase (-1.7% y/y) followed a 17.8% 3Q gain as the lower value of the dollar continued to improve the competitiveness of U.S. products. Real imports, conversely, rose at a lesser 10.5% rate and remained down 7.7% versus last year.
  • Growth in domestic final demand moderated to 1.7% after a 2.3% 3Q rise. Nevertheless, these were the first back-to-back quarterly increases since 2007. A 13.3% increase (-8.7% y/y) in business investment in equipment & software led the gain after its 1.5% 3Q rise. Investment in business construction, however, offset much of this increase with a 15.4% decline (-24.7% y/y). Residential investment also was strong and posted its second quarterly increase (-12.1% y/y). Personal consumption growth lagged with a 2.0% gain (1.1% y/y) that was dragged down by a sharp quarterly decline in spending on new autos with end of the “cash-for-clunkers” sales campaign. Spending on furniture & appliances rose for the second straight quarter (0.1% y/y) while spending on clothing surged q/q but remained down 0.7% y/y. Spending of services last quarter rose moderately (0.6% y/y). Finally, quarterly spending by governments fell slightly (+1.6% y/y), mostly due to a drop in defense spending though it remained up 3.1% y/y.

A longer and more deeper look into US GDP and inventory cycle tells us that the de-inventorization that we saw Dec 2008 and March 2009were the sharpest ever from the time that GDP was released by BEA.

Chart: GDP numbers and Inventory stocking 1947 to 2009


But every time inventory cycles have shrunk, US has shown a remarkable ability to spring back with a vigor that has left many surprised. The question then is whether US can repeat their past record of a vigorous inventory build up which will further lead the GDP growth onto a more stable trajectory?

Rising Inventory cycles have been led by creation of new jobs which have led to sustained reduction in unemployment rates. Will the current cycle of Inventorisation lead to such a conclusion is left to be seen.

The 1992 -2000 period was the golden era for American middle class as Jobs were plenty. A quick look at the charts below show the reasons. They were period that were leading to strong job creation through inventory build up which in turn was being pulled through massive economic activity.

Chart:Un-employment rate 1948 to 2009:


This weeks Job numbers should be an important trend indicator on whether the strong GDP number indeed are supporting the needed jobs or are these just blips.

Vishal Damor
http://investingcontrarian.com/

Vishal Damor, works for an emerging market financial consulting firm and is the editor at INVESTING CONTRARIAN, a financial analysis and reporting site covering commodities, emerging markets and currencies.

© 2010 Copyright Vishal Damor - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules