Advance Estimates say 4th Quarter GDP Increased by 3.2%

Posted on January 28, 2011


The Bureau of Economic Analysis released it’s “Advance” estimate of Real GDP and reported that GDP increased 3.2 percent in the fourth quarter after increasing 2.6 percent in the third quarter.  Real GDP rose 2.9 percent in 2010 after falling 2.6 percent in 2009.

4th Quarter GDP Growth

Source: Bureau of Economic Analysis

 The Following contributed to real GDP growth in the fourth quarter:

  • A large reduction in imports of which an increase is a subtraction from GDP.
  • The  4.4 percent increase in consumer spending the largest increase since 2006.
  • A rise in residential fixed investment following a large downturn in the third quarter.

Personal consumption expenditures increased 4.4 percent in the fourth quarter, compared with an increase of 2.4 percent in the third.  Durable goods increased 21.6 percent, compared with an increase of 7.6 percent.  Non-durable goods increased 5.0 percent, compared with an increase of 2.5 percent.  Services increased 1.7 percent, compared with an increase of 1.6 percent.

Non-residential fixed investment increased 4.4 percent in the fourth quarter, compared with an increase of 10.0 percent in the third.  non-residential structures increased 0.8 percent, in contrast to a decrease of 3.5 percent.  Equipment and software increased 5.8 percent, compared with an increase of 15.4 percent.  Real residential fixed investment increased 3.4 percent, in contrast to a decrease of 27.3 percent.

Exports of goods and services increased 8.5 percent in the fourth quarter, compared with an increase of 6.8 percent in the third. Imports of goods and services decreased 13.6 percent, in contrast to an increase of 16.8 percent.

Federal government consumption expenditures and gross investment decreased 0.2 percent in the fourth quarter, in contrast to an increase of 8.8 percent in the third.  National defense decreased 2.0 percent, in contrast to an increase of 8.5 percent.  Non-defense spending increased 3.7 percent, compared with an increase of 9.5 percent.  Real state and local government consumption expenditures and gross investment decreased 0.9 percent, in contrast to an increase of 0.7 percent.

The change in private inventories subtracted 3.70 percentage points from the fourth-quarter change in real GDP after adding 1.61 percentage points to the third-quarter change.  Private businesses increased inventories $7.2 billion in the fourth quarter, following increases of $121.4 billion in the third quarter and $68.8 billion in the second.

It is good to see that the economy produced this GDP number without federal government spending.  Hopefully from here into at least the intermediate term future we will not need the Federal government to prop up aggregate demand. However, state governments are not only still struggling, but will probably become a drag on GDP sometime in 2011.

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