Economy grows at 5.7 pct pace, fastest since 2003

[38special]

4th quarter's fast economic pace likely to wane - Yahoo! Finance

It doesn't mean we're out of the hole, but it's a start. I try to think optimistically, albeit it's very difficult.

WASHINGTON (AP) -- The economy's faster-than-expected growth at the end of last year, fueled by companies boosting output to keep stockpiles up, is likely to weaken as consumers keep a lid on spending.
The 5.7 percent annual growth rate in the fourth quarter was the fastest pace since 2003. It marked two straight quarters of growth after four quarters of decline. Growth exceeded expectations mainly because business spending on equipment and software jumped much more than forecast.
Still, economists expect growth to slow this year as companies finish restocking inventories and as government stimulus efforts fade. Many estimate the nation's gross domestic product will grow 2.5 percent to 3 percent in the current quarter and about 2.5 percent or less for the full year.
That won't be fast enough to significantly reduce the unemployment rate, now 10 percent. Most analysts expect the rate to keep rising for several months and remain close to 10 percent through the end of the year.
High unemployment and stagnant wage growth will likely keep consumers cautious about spending. Wages and benefits paid to U.S. workers posted a scant gain in the fourth quarter. And for all of last year, workers' compensation rose by the smallest amount on records going back more than a quarter-century.
The economic recovery could falter if consumers, who account for 70 percent of economic activity, lack the income to ramp up spending.
"That's why there's so much hand-wringing right now," said Brian Bethune, chief U.S. financial economist for IHS Global Insight. "Can the economy really sustain this? That's the big question mark sitting out there."
With hiring still weak, President Barack Obama has stepped up his focus on job creation. On Friday, he urged Congress to embrace his call for tax incentives to create jobs.
Obama wants to give companies a $5,000 tax credit for each net new worker they hire in 2010. Also, businesses that increase wages or hours for existing workers in 2010 would be reimbursed for the extra Social Security payroll taxes they would pay.
"It's time to put America back to work," the president told workers at the Chesapeake Machine Company in Baltimore. But he acknowledged that "while these proposals will create jobs all across America, we've got a long way to go to make up for the millions of jobs that we lost in this recession."
About 60 percent of the fourth quarter's growth resulted from a sharp slowdown in the reduction of inventories as firms began to rebuild stockpiles depleted by the recession.
Changes to inventories added 3.4 percentage points to the fourth-quarter growth, the Commerce Department said in its report Friday. Excluding inventories, the economy would have grown at a 2.2 percent clip, the government said. That's an improvement from 1.5 percent in the third quarter.
Consumer spending rose 2 percent, down from a 2.8 percent rise in the third quarter. It added 1.4 percentage points to GDP growth.
A steep increase in exports also helped boost growth last quarter. The shipment of goods overseas rose 18.1 percent, far outpacing a 10.5 percent rise in imports. Net exports added 0.5 percentage point to GDP.
Government spending was actually a slight drag on growth in the fourth quarter: A small increase in federal spending was outweighed by a drop in state and local spending.
Still, federal government spending is likely to pick up and add to growth in the first quarter, Bethune said.
Business spending will likely boost economic growth for several quarters, Bethune said, though not likely enough to make up for sluggish consumer spending. Many companies are upgrading computers, cell phones and machinery as their equipment needs to be replaced just to maintain current levels of production.
In addition, many businesses have healthy balance sheets and don't need to pay off the large debts that households are struggling with, Bethune added.
For now, the growing economy is benefiting companies up and down the supply chain. Ford Motor Co. this week reported higher fourth-quarter sales and its first annual profit in four years, as it recovers from the devastating downturn the auto industry.
Ford's "recent success has benefited us," said Tom Schumann, general manager of EC Kitzel & Sons Inc., a small cutting tool fabricator based in Cleveland, Ohio.
The company, which has 30 employees, bought a new machine tool in December and hired a new worker to run it, the company's first hire since last spring. Still, many of the company's suppliers are struggling.
"I'm not totally convinced we're out of the woods yet," Schumann said, referring to the economy.
Friday's report is the first of the government's three estimates of gross domestic product and is likely to be revised. The government initially estimated third quarter growth was 3.5 percent, which was later revised down to 2.2 percent. The next estimate will be released Feb. 26.
The report provided an upbeat end to an otherwise dismal year: The nation's economy declined 2.4 percent in 2009, the largest drop since 1946. That's the first annual decline since 1991.

 

[Gav-n-Tn]

Folks are still without work and losing everything that they've worked for. Honestly, those figures do not mean squat to a por man.

 

[Cwood]

Yes, but before you get to excited read this....

GDP data may overstate economy's health - Answer Desk- msnbc.com

 

[edsinger]

Look, I can tell you the economy is in deep shi^%. There is no construction going on and none on the horizon due to coming taxes. This ride isn't over.

 

[38special]

Yes, but before you get to excited read this....

GDP data may overstate economy's health - Answer Desk- msnbc.com

Interesting read.

And here I thought maybe Obama helped us all.

 

[IndyBeerman]

Yes, but before you get to excited read this....

GDP data may overstate economy's health - Answer Desk- msnbc.com

The GDP was revised FOUR times last year, with each revision being lower than the previous. Don't be surprised to see this number shrink to 1.5 pr even lower after Obama's vodoo economics are taken out of the facotr.

 

[mettle]

We haven't seen anything yet. Once the fake money runs out, and Washington stops pumping money into the states, we'll see the states fail on a national level.

I believe whole heartedly that once the injection of fake money by the feds takes places that we'll see the REAL recession... and the spiral downward into another depression.

Capitalism goes through growth and retention; and, when it is not allowed to function naturally it fails.

 

[edsinger]

Obama's voodoo economics.

Wow, that is not the word I would have used, too Reaganesque.

But I am just weird, the point you were trying to make was spot on.

 

[LotsofGlocks]

Obama=

 

[SSGSAD]

Look, I can tell you the economy is in deep shi^%. There is no construction going on and none on the horizon due to coming taxes. This ride isn't over.

Hang on, it is going to be a long 8 sec.......

 

[LEaSH]

I'm scared these days that I might have to disolve my small business and go to work for someone again - I'm not too proud to revert back.

But nobody is hiring so really I'm not going to make a move until I'm forced to. Until then the fight goes on. I'll shovel manure if it pays for the heat and light.

 

[IndyBeerman]

vodoo economics

Wow, that is not the word I would have used, too Reaganesque.

But I am just weird, the point you were trying to make was spot on.

Obama's accounting team of spin doctors has twisted, spun and mutilated so many numbers on every item that he has touted as a benefit (health care reform, stimulus for starters) with deferred accounting and other hidden factors to the point that it may be YEARS after he is defeated that we start to see just how bad it really is.

Just look at the numbers they tried to post as jobs saved/created when in reality it never happened and was used to give a raise to the current base of workers at any number of locations.

I'm surprised he has not come up with a new styled Charlie McCarthy dummy made to look like George W. with a pull string that has him say "My Fault, I caused it"