GDP Meets Analysts' Expectations
March 30, 2006 — -- The government's third and final reading for U.S. gross domestic product for October to December came in at 1.7 percent growth rate, right where economists had expected it to settle.
The small figure could be considered ominous, but fresher readings suggest America's business health has improved and is mostly sound.
While the latest figure for GDP in the October-to-December period was indeed anemic and marked the worst performance in three years, the new reading actually turned out to be slightly better than the 1.6 percent growth rate estimated a month ago, according to the Commerce Department's report released today.
The 1.7 percent pace matched analysts' expectations. The slight upgrade for the quarter reflected stronger inventory building by businesses than previously thought.
The Federal Reserve and other economists say the economy bounced back smartly in the current January-to-March quarter. Private analysts predict growth during this period will clock in at a briskpace of 4.5 percent or higher. Then economic activity will moderate to around a 3.4 pace in the April-to-June quarter.
Some items of note from the report:
- The obvious dip in economic growth during Q4 appears to be a temporary aberration. Economists believe Q1 2006 will see a significant upturn (some surveys pointing as high as 4.6 percent GDP growth for Q1).
- Today's final read on core inflation -- excluding volatile food and energy prices -- came in at 2.4 percent for Q4. That's an upward revision from the initial 2.1 percent, and is in the Fed's "worry" zone, which likely explains the first Bernanke rate hike and may be justification for a few more this year.
- Corporate profits grew at their fastest pace in four years -- a nice turnaround from a slight retreat in the third quarter and a sign that business spending might pick up to support those BIG jump estimates for Q1 2006.
The first look at January to March 2006 is scheduled to be released on April 28.
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 service produced in the country.
Some information in this report from Associated Press wire service.
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