GDP Debunks Double Dip Recession Fears

The U.S. is still growing despite all of the world’s troubles and despite the currency fluctuations.  The Commerce Department’s  preliminary reading on Gross Domestic Product showed to have growth of  2.8% and the deflator, which accounts for inflation in the GDP reading, came in at 0.7%.

The good news is growth, the bad news is that this was a tad light and we have not seen a headline GDP of 3% or more in four quarters.  There was a slight discrepancy in headline estimates: Bloomberg had a consensus of 3.1% growth and Dow Jones had a consensus of 3.0% after a meager third quarter growth of only 1.8% and growth of an even smaller 1.3% in the second quarter.

The deflator measures the inflationary component as a more focused GDP measurement and both Bloomberg and Dow Jones had the price-adjusted GDP projected at 1.5% versus about 2.6% in the previous quarter.

Consumer spending rose by 2.0%, and that is roughly two-thirds of GDP.  That is up from 1.7% in Q3 and up from 0.7% in Q2.  The rest of the boost came from businesses restocking shelves and inventory.

The good news is that we are still growing.  Unfortunately it remains extremely muted.  The total for 2011 now appears to be only 1.7% GDP growth for the whole year.  It is no recession, but it feels like telling your four-year old kid for the birthday gift that they can get two gifts of any choice… and you are at the dollar store.

JON C. OGG