Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  The first estimate for Q4 real GDP growth is 2.8% at an annual rate
Posted Under: Data Watch • GDP

 
Implications: Real GDP grew at a 2.8% annual rate in the fourth quarter, up from 1.7% in Q3 and its strongest growth since Q2 2010.  The Q4 increase came in just slightly below the consensus estimate of 3%.  Nonetheless, the market seems to be disappointed in the data.  The reason?  Because consumption and business investment were weaker than expected, while inventories jumped.  We do not agree with this disappointment.  The weakest part of today's report – by far – was government purchases, driven by a wind-down of operations in Iraq and continued state and local spending cuts.  Excluding government, real GDP grew at a robust 4.5% annual rate in Q4 and was up 2.6% for 2011 as a whole.  Home building was up at a 10.9% annual rate in Q4.  Excluding a couple of quarters in 2009-10, which were artificially and temporarily inflated by the homebuyer tax credit, this is the fastest growth in residential construction since 2004.  Real GDP has now accelerated for three quarters in a row, durable goods orders have jumped for the past two months and suggest that business investment will accelerate in 2012.  With housing and investment improving, the Federal Reserve will have a difficult time justifying QE3.  However, nominal GDP grew at a 3.2% annual rate in Q4, which is a slowdown from recent quarters.  We think this was a false signal.  Nominal GDP grew 3.7% in 2011 and is up at a 4.2% annual rate in the past two years.  These are not that far from the Federal Reserve's long-run outlook of a 4.5% growth rate for nominal GDP.  As a result, we think essentially zero percent interest rates are too low and that trying to boost the economy further with easier money would be a mistake. A third round of quantitative easing is not needed and we expect the Fed to raise rates well before its current forecast of late 2014 or beyond.

Click here for a printable version.
Posted on Friday, January 27, 2012 @ 12:52 PM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2021 All rights reserved.