GDP INCREASES at a robust pace!! Is the Recession OVER???

The Bureau of Labor Statistics (BLS) published the latest Gross Domestic Product (GDP) statistic measuring in dollar terms the value of the production of goods and services in the 4th quarter (Oct, Nov, Dec) of 2009.  It shows GDP increased, at an annual rate, of 5.7%. Indeed, a robust increase. Remember, what we have is GDP growth/expansion, NOT ECONOMIC GROWTH.  We are still inside our Production Possible Fronitier, mostly because we still have high unemployment.  GDP is the sum of the 4 main sectors of the economy---Consumption Expenditures by Individuals, Investment Expenditures by Businesses, Government Expeditures (Fed, State, Local) and Net Exports (Exports minus Imports). These 4 sectors make-up the total demand for US produced goods and service, or the total Aggregate Demand.  These are shown in the graph. Investment expenditures here are identified as "E&S" (equipment and softward) and "stuctures" (commercial buildings, factores, etc) and "Inventories"(goods produced sitting in warehouses/shelves that have not been sold to final end user).  Here is a brief analysis of each component part from data from BLS as broken down on THIS BLOG...The analysis in "" (double quotes) is NOT mine, it comes from the linked blog...

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 5.7 percent in the fourth quarter of 2009, (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.2 percent.

CONSUMPTION EXPENDITURES ("C")

Real personal consumption expenditures increased 2.0 percent in the fourth quarter, compared with an increase of 2.8 percent in the third. Durable goods decreased 0.9 percent, in contrast to an increase of 20.4 percent. Nondurable goods increased 4.3 percent, compared with an increase of 1.5 percent. Services increased 1.7 percent, compared with an increase of 0.8 percent.

""The decrease in durable goods makes sense considering the increase caused by the cash for clunkers program in the third quarter. Also remember that durable goods is the smallest component of PCEs (Personal Consumption Expenditures ("C") ), totaling just 12% of total expenditures. The increase in non-durables is a pleasant surprise while the increase in services (the largest component of PCEs at 65.77%) is welcome as well.""

INVESTMENT EXPEDITURES ("I")

Real nonresidential fixed investment increased 2.9 percent in the fourth quarter, in contrast to a decrease of 5.9 percent in the third. Nonresidential structures decreased 15.4 percent, compared with a decrease of 18.4 percent. Equipment and software increased 13.3 percent, compared with an increase of 1.5 percent. Real residential fixed investment increased 5.7 percent, compared with an increase of 18.9 percent.

""The increase in equipment and software is very welcome, as it indicates business is starting to restock it's physical infrastructure. And an increase in residential investment is also a positive development.""

NET EXPORTS (Exports minus Imports)

Real exports of goods and services increased 18.1 percent in the fourth quarter, compared with an increase of 17.8 percent in the third. Real imports of goods and services increased 10.5 percent, compared with an increase of 21.3 percent.

""The increase in exports plays into the "Asian economies leading the world out of the recession" theme (which is already happening). The increase in imports indicates the US demand is also increasing.
I expect a fair amount to be made about the effect of inventory building in the report. These account for almost 60% of the 5.7% growth rate. What you're seeing here is a ridicules attempt at saying "some growth is bad and some growth is good." The bottom line is inventory restocking is a legitimate economic activity that leads to growth. The argue otherwise is to let your prejudices color your analysis.""