Sep 2
Economic growth in 4th quarter ’09, a good sign PDF Print E-mail

It seems to have been lost in the rhetoric about President Barack Obama’s one year anniversary, the Democrats’ loss of their 60-seat super majority and any other number of politically charged incidents in recent weeks. But there is actually a strong sign that America is climbing out of the recession.

The U. S. Commerce Department reported that the economy, measured by the Gross Domestic Product (GDP) grew by a pleasantly surprising 5.7 percent annual rate during the final quarter of 2009.

The significance of the increase is emphatic because the GDP growth in the third quarter of 2009 was a relatively low 2.2 percent. Generally, for 2009, the U.S. economy contracted by 2.4 percent, the worst performance since 1946. Therefore, the sharp fourth quarter increase is quite significant.

However, as encouraging as the growth in the economy is, not all economists are convinced that the recession is really over. This, despite positive responses from institutions like Merrill Lynch and economists associated with the Obama administration, who have interpreted the growth as indicative of success in the administration’s economic policies.

Economist, Arnold Chevannes, director of a Palm Beach think tank, said there has to be caution that the significant growth in 2009 is not taken that the economy is now fully on track. Chevannes concludes that much of the growth in the fourth quarter was seasonal, related to supply and demand in the holiday period mid November to the end of December.

“When you take out the seasonal factor, you will see that consumer demand was relatively low, at or below 2 percent for the rest of the year. For the economy to really be on sound grounds, consumer demand must increase significantly, and be sustained, to attract business expansion, and hence, job growth.”

Another economist, consultant Gerry Anderson of Delray, also stated that the significant 2009 growth was fueled by fourth quarter activities when retailers and other businesses increased their inventories. (The chief economist of the National Association of American Manufacturers said replenishing of business inventories accounted for some 60 percent of the economic growth in the fourth quarter).

“The problem that could affect this first quarter of 2010 is that excess inventory from 2009 will make it unnecessary for retailers to increase their inventory, and, moreover, consumer demand normally falls in the first quarter of each year. I am predicting that GDP will decline to about 2.5 percent in this quarter, not the 5.7 percent for 2009. A strong collusion of events needs to take place, including more credit to businesses, lower taxes, and heavier spending of stimulus funds to generate stronger economic growth.”

 



Add this article to your favorite Social Bookmarking websites
Twitter! Facebook! LinkedIn! Digg! StumbleUpon! Reddit! Del.icio.us! Google! Live!
 

Add comment

Please note: cnweeklynews.com reserves the right to edit and or delete comments posted to this site.


Security code
Refresh