GDP Growth Lowest in Three Years

Feb. 28, 2005 — -- The health of the U.S. economy was a bit better than originally thought during the fourth quarter of last year, according to new numbers from the government.

The Bureau of Economic Analysis released its second of three reads on the fourth quarter of 2005 today, indicating that the overall economy had grown at a 1.6 percent annual pace from October to December. This is significantly better than the original read of 1.1 percent and outpaces consensus estimates of 1.5 percent.

Even with the upward revision, Q4 2005 saw the worst performance for overall economic growth in three years. A final assessment of the quarter will be released on March 30.

So What Changed?

There are three major components to today's upward revision: increasing business inventories, increased business spending on equipment and construction, and stronger government spending. These three numbers moved up as new and revised data were fed into the government's economic model.

So should we be worried? Probably not. Economists looking at the most recent economic data say that these tepid numbers will likely be short-lived. There will likely be a small upward revision in the final read of GDP next month, and Q1 2006 will likely show strong growth according to economists.

What Is GDP? Gross Domestic Product is the broadest measure of economic activity in the United States. The report measures the value of all goods and services produced in the country.