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WP: Economy soars 5.7 percent in Q4, fastest in 6 years


SkinsHokieFan

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Good news.

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/29/AR2010012901694.html?hpid=topnews

WASHINGTON (Reuters) - The economy grew at a faster-than-expected 5.7 percent pace in the fourth quarter, the quickest pace in more than six years, as businesses reduced inventories less aggressively, the Commerce Department said on Friday.

The first estimate put fourth-quarter gross domestic product growth at its fastest pace since the third quarter of 2003. The economy expanded at a 2.2 percent annual rate in the third quarter.

Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 4.6 percent rate in October-December period.

Growth was boosted a sharp slowdown in the pace of inventory liquidation, a factor that could mask the strength of the economic recovery from the longest and deepest downturn since the Great Depression.

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we stopped 1 line short of?

But there remained reason to doubt how strong the economic recovery will be in 2010. The biggest component of the GDP growth was a steep drop in the pace at which businesses were cutting back on their inventories. Firms reduced their inventories by $33.5 billion in the fourth quarter, compared with $139 billion in the third. In the math of GDP, which attempts to capture the value of goods and services produced within U.S. borders, that added 3.4 percentage points to overall growth.

i'll take anything we can get, but the 3rd para is relevant.

I'm not an economist but that growth sounds fake?

or are we saying if we say good news it will catch on?

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I guess this is good news. Usually growth of 5.7% or anything over 4% is considered inflationary and unsustainable. Though with unemployment so high, I'm guessing we have room to grow for a while at this pace.

Still, don't be suprised if the fed raises interest rates and starts to put the breaks on soon. Nice steady sustainable growth is the target. 5.7% is a little overshooting.

Hopefully we'll add net jobs rather than loose them this quarter. That would be really good news too.

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we stopped 1 line short of?

i'll take anything we can get, but the 3rd para is relevant.

I'm not an economist but that growth sounds fake?

Well when you reduce the size of the pie, slices appear bigger.

It's fairly common for companies to be reducing their inventories and focusing on cash flow in times like these. However, that doesn't always go hand in hand with economic growth. Companies were scrambling to reduce inventories in Q1 of 2008 after the dissapointing 2007... but the economy was still tanking.

So it's a good sign. The 5% number is probably a bit inflated.

or are we saying if we say good news it will catch on?

There is definitely something to this. However there remains quite a few folks out of work right now.

.....

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Good news.

It did cost us a Trillion dollars not including the Banker payoff.

Just to get the same numbers during the Bush years

Hope we see jobs soon

Actually I think you mean Clinton. I don't think Bush ever had the economy growing at 5.7%.... If he did it was maybe for one quarter out of eight years in 2003 where he saw like 4.5%, not 5.7%... I don't think we've seen 5.7% gdp growth since the 1960's.

here is a chart.

http://www.intelligentguess.com/blog/wp-content/uploads/2007/05/windowslivewriterusagdpannualgrowthslumpstoitslowestsince-bf36usa-gdp-q1-2007-versus-savings-rate3.jpg

windowslivewriterusagdpannualgrowthslumpstoitslowestsince

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Well when you reduce the size of the pie, slices appear bigger.

It's fairly common for companies to be reducing their inventories and focusing on cash flow in times like these. However, that doesn't always go hand in hand with economic growth. .....

It's all about inventory. When the economy slows, widget sales slow, widget inventory increase, and ultimately widget manufactures slow production and lay off workers because they don't need new widgets.

Over time, widget inventory is reduced and the widget manufactures have to increase production to increase inventory so they don't run out of widgets to sell. 3.5% of this economic growth is due to manufactures increasing production. Which is the highest rate in 20 years. That's a good thing. It means widget manufactures are adding produciton capacity because they believe demand will continue...

The risks of such high growth are it can spur inflation as manufactures compete for resources to increase production. Which isn't really a problem for us, because we have something like 16% unadjusted unemployment. Still sustained growth at such a high level would be ultimately harmful if it were allowed to continue...

The good news is such high growth levels will increase employment and give the Federal government and the federal reserve some wiggle room to be more fiscally responsible. Not only give them wiggle room, it will require them to be or risk overheating the economy. Now we aren't quite there yet until we've sopped up some of the unemployment, but at least it's on the horizon. Again require fiscal responsibility and not just with smoke and mirrors like in the state of the union with caping federal spending at an outragously high level. But maybe we will get some real deficite reduction for the first time in nearly a decade.

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I think anyone who believes where out of the woods is crazy, but anyone who believes that there aren't signs that the sun is breaking through is also crazy... or just professionally grumpy.
I consider you one of the greatest optimists at this site. Which is a good thing.

But the article itself is pessimistic and places the soaring economy (GDP actually) in the sad context of companies liquidating their inventories. If those inventories are not replaced, and the article states that they certainly will not be at a 1:1 ratio, then we could be in big trouble as far as future job losses. It appears that the government is going to find itself in the rare position of having to slow growth during a recession without stopping it altogether. Typically done by raising interest rates.

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Yeah, I do try to keep an optimistic outlook, esp. on this site. More, in my experience good builds upon good just as bad builds upon bad. Also, if one discounts all ones blessings than one finds one is left with only curses.

So, this ephemeral, temporary good may lead to other goods, because the net result is that businesses and people will have a bit more. If they look at it inversely, then they'll all become squirrels hiding their nuts for the Winter and probably make the Winter last longer.

Hope is a powerful component in an economic recovery.

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Weak dollar and cutting the fat make a big difference,both have other consequences though....especially if you are the fat

I'll take what good news I can...though I have certainly had a productive yr,many have not.

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The economy is showing signs of recovering, and a Republican won a Senate seat in Massachussetts. I wouldn't recommend quitting your day job to take up work as a prognosticator. :pfft:

From historical trends, we should see a pretty severe drop around late spring that will take the rest of '10 to recover.

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From historical trends, we should see a pretty severe drop around late spring that will take the rest of '10 to recover.

Historical trends? clinton saw 3 years os sustained growth rates in 1997-2000.

Likewise in 2003 when bush saw 6.9% growth in his best quarter in 8 years, the economy continued to grow until 2006.

What historical trends are you reffering too?

https://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=2&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Qtr&FirstYear=1990&LastYear=2009&3Place=N&Update=Update&JavaBox=no

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