US Real gross domestic product (NYSEMKT:GDP) increased 5.7 percent in the fourth quarter of 2009 after increasing 2.2 percent in the third quarter, according to estimates released today by the Bureau of Economic Analysis(BEA). This number is impressive by any standards given that it comes after highly bad figures of the last quarters. It is certainly a proof of the resilience of the US economy as well as its remarkable capacity to recover. However, the numbers should not hide the fact that the consumption has still not recovered. To requote the BEA report : "The pickup in real GDP growth reflected a slowdown in the rate at which businesses drew down inventories; while inventories were drawn down for the seventh straight quarter, the drawdown was much less than in the third quarter. The pick up also reflected a upturn in business investment, mainly due to a pickup in equipment and software. In addition, imports (a subtraction in the calculation of GDP) rose less than in the third quarter.These contributions to real GDP growth was partially offset by slowdowns in federal spending, consumer spending, and residential housing." The high GDP growth is a result of the low base impact. The manufacturing disproportionately suffered in 2008 and 2009, and it is simply recovering from what is an exceptionally low base. In my opinion, the lifeblood of the US economy is consumer spending. As long as this does not recover, we cannot talk of a fully fledged recovery in the US. One should not forget that 2009 was a year of contraction regardless of what the Q4 growth rate has been : GDP in 2009 declined 2.4 percent. In 2008, growth was only 0.4 percent.
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