WASHINGTON – Gross domestic product increased at a 5.7% annual rate in the advance fourth quarter report, surpassing economists’ estimates and posting the largest quarterly increase in almost six years, as business began restocking their inventories and exports jumped, the Commerce Department reported today.
Consumer spending rose 2.0% annually in the fourth quarter, following a 2.8% increase in the third quarter. The increases represented the first back-to-back quarterly consumer spending increase in two years.
Core personal consumption expenditures, excluding food and energy purchases, increased 1.4% following a 1.2% rise in the third quarter. Economists forecast the core PCE price index to increase 1.3%.
Gross private domestic investment increased 39.3%, the largest increase since 1984, led by equipment and software purchases. Residential investment increased 5.7% following an 18.9% increase in the third quarter.
Private inventories decreased by $33.5 billion after decreasing $139.2 billion in the third quarter. Inventories contributed 3.82 percentage points to the total GDP.
Economists polled by Thomson Reuters expected 4.4% GDP growth for the quarter, according to the median estimate.
For all of 2009, GDP fell 2.4%, the largest annual decline since a 10.6% drop in 1946. GDP rose 2.2% in the third quarter.
Many economists expected the improvement in inventory data. Analysts for Janney Capital Markets cautioned that the inventories restocking “was unlikely to prove a ‘springboard’ back to economic growth,” the analysts wrote in a research note published before the report.
“Volatility in inventories is one of the major reasons why GDP growth can vary sharply from quarter to quarter even while underlying conditions remain relatively unchanged,” they wrote. “We don’t expect the markets will react all that aggressively to an upside surprise” in the GDP numbers, they said.
Exports jumped 18.1% at an annual rate and exports of goods surged 28.1%, the largest increase since 1979. The trade gap between exports and imports shrank to $341.1 billion from $357.4 billion in the third quarter.
Government spending decreased 0.2% at an annual rate. The report estimated that federal stimulus funding provided state and local governments with $80 billion in grants, $25 billion in capital transfers and $3 billion in subsidies for housing and energy.
Today’s report is the first of three quarterly GDP estimates. Revised figures for the fourth quarter will be released on Feb. 26.
