–Q1 Appears to Have More Modest Growth

By Joseph Plocek

WASHINGTON (MNI) – The U.S. Q4 real GDP revision, now in the
history books, was to a lower growth rate of +5.6%, less than private
economists predicted. Nevertheless, the showing was pretty spectacular
as inventories, exports, consumption and nonresidential fixed investment
surged; in fact the gain was the best in six years since Q3:2003.

There were downward revisions to inventories and investment based
on new data, and downward revision to financial services fees in
consumption based on new banking data and a higher deflator. The overall
revision was 0.3 point lower than the prior report.

Real final sales were up 1.7% after revision, topping the gains of
+1.5% in Q3 and +0.7% in Q2. This still marks an improving trend.

Federal government spending slowed to unchanged, after +8.0% in Q3
as TARP and other stimulus money was spent. State and Local government
spending was -2.2% after -0.6% in Q3, and probably will continue
slowing as budgets are tightened to reflect lower real estate
assessments.

Corporate profits from current production are now +$108.7 billion,
about evenly split between financial and nonfinancial firms. Overseas
profits contributed nothing as they were down $16.1 billion.

The bottom line is that Q4 still represented a huge pickup
in growth from inventory, exports and PCE gains. Growth is slower in
Q1:2010, running so far at about half the pace of Q4.

Motor vehicle output added 0.45 point to Q4 growth and 1.45 points
to Q3, in part due to government buying incentives that gave away cash.
These gains are unlikely to repeat, and inventory stocking is likely to
slow ahead.

If Q1 prints another gain in growth, it will mark three consecutive
periods of advancement — probably enough evidence to force an official
declaration that recession ended in mid-2009. The recession began in
December 2007 and resulted in five of the next six quarters posting
negative growth rates. Its likely duration was 18 months.

The Q1:2010 GDP report will be released on April 30.

GDP Compnts: Q2 Q3 Q4 Orig Q4 Rev Q4 Final
Real GDP -0.7% +2.2% +5.7% +5.9% +5.6%
Final Sales +0.7% +1.5% +2.2% +1.9% +1.7%
PCE -0.9% +2.8% +2.0% +1.7% +1.6%
Res Fix Invest -23.3% +18.9% +5.7% +5.0% +3.8%
Nonres FixInvest -9.6% -5.9% +2.9% +6.5% +5.3%
Net Exports add 1.65 cut 0.81 add 0.50 add 0.30 add 0.27
Chg Pvt Invty cut 1.42 add 0.69 add 3.39 add 3.88 add 3.79

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