Q4 GDP Revised Down to 2.8%

Ugh! Fourth-quarter GDP growth was revised down to 2.8% from the previous estimate of 3.2%. I always find these news items a little odd since we’re learning what happened between five months ago and two months ago.

The simple fact is that 2.8% GDP growth simply absorbs new workers coming into the work force; it’s not enough to lower the unemployment rate.

This is important for investors because the expanding profit margin story has mostly run its course. We need to see expanding sales growth soon and that will mean more jobs and higher wages.

The U.S. economy grew at a 2.8 percent annual rate in the fourth quarter, slower than previously calculated and less than forecast as state and local governments made deeper cuts in spending.

The revised increase in gross domestic product compares with a 3.2 percent estimate issued last month and a 2.6 percent gain in the third quarter, figures from the Commerce Department showed today in Washington. The economy, excluding inventories, grew at a 6.7 percent pace, the most since 1998.

Americans may be in a better position to keep spending after tax cuts put more money in their pockets, while companies such as Caterpillar Inc. benefit from faster economies overseas and business investment. A surge in oil prices sparked by turmoil in Africa and more cutbacks by state and local governments represent risks to growth.

Posted by on February 25th, 2011 at 8:37 am

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