GDP up in 4Q 2010

GDP estimates from BEA for the 4th quarter of 2010 shows that the economy grew by 3.2%. This compares with a 2.6% growth rate in the 3rd quarter. For the entire year, GDP was up by 2.9%. (Remember that this is an “advanced” estimate based on incomplete data, including trade data. It will be revised twice in future months and should be treated accordingly.)
Good news, but there is a worrisome detail in the data on fixed investment. Investment in equipment and software was up, but not as much as previous quarters. This investment grew by only 5.8% in the 4Q, compared with 14.6% in 4Q 2009, 20.4% in 1Q 2010, 24.8% in 2Q 2010 and 15.4% in 3Q 2010. However, almost all of that slow down is in investment in transportation equipment. Investment continues to grow in IT equipment and software and in industrial equipment. In the case of IT equipment and software, investment grew by 20.7% in the 4Q, although investment specifically in software grew by only 6%. Whereas investment in transportation equipment dropped by 9.3% and investment in industrial equipment grew by 4.2%.
Unfortunately, the GDP numbers do not offer any guidance on investment in intangibles other than software. So we do not know whether companies have increased their investment in important areas such as human and organizational capital. But that is a discussion for another time.
Bottom line: the economy seems to be picking up. But not as good as it could be. As the New York Times notes, “While an improvement, the latest output number was slightly below analysts’ expectations of 3.5 percent.” Nor is it anywhere near the levels of previous recoveries at this point in the cycle. So more needs to be done.

2 thoughts on “GDP up in 4Q 2010”

  1. 4Q 2010 GDP revised downward

    Not so good news this morning. BEA released the second estimate for 4Q GDP — which was revised downward to 2.8%. The first (“advance”) estimate last month was that GDP grew by 3.2% (see earlier posting). According to BEA, the…

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  2. 4Q 2010 GDP now set at 3.1%

    Here we go again. BEA released the third estimate for 4Q GDP, revised upward to 3.1%. The second estimate was 2.8%, revised downward from first (“advance”) estimate of 3.2% (see earlier posting). This growth rate is closer to the earlier…

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