The government reported Friday that fourth quarter GDP grew 2.8%, which was well above the third quarter growth rate of 1.8%.
The two most significant issues detracting from the best quarterly GDP
growth since Q2 2010 both tie into consumer spending. First, and most
importantly, GDP was lifted 1.94 percentage points by a build in
inventories. Some are saying that this is okay, since third quarter
growth was penalized by 1.35 percentage points due to an
inventory draw down, however, I see no relevance. Despite the
promotional environment of the fourth quarter, the aggregate performance
of retailers was poor.
The other point that I see as significant came from the growth of the
services sector in Q4, which only managed 0.2%, according to the
government. Our services dominant economy cannot sustain significant
economic growth without robust activity in services.
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