GDP number provides optimism

Positive signs regarding the economy remain intact with today’s news from the Department of Commerce which indicated that fourth quarter GDP was up at an annual rate of 3.0 percent.

This is the second estimate for the fourth quarter released by Commerce, and it represents a nice sequential gain, too, as third quarter GDP rose only 1.8 percent by comparison.

According to Commerce, this fourth quarter increase “reflected positive contributions from private inventory investment, personal consumption expenditures, exports, nonresidential fixed investment, and residential fixed investment that were partially offset by negative contributions from federal government spending and state and local government spending,” and Commerce also pointed out that imports—which represent a subtraction in the calculation of GDP—increased.

A look at some of the data behind the 3.0 percent growth figure appear to match up well with good—if not great—supply chain and logistics activity.

One example is that in the fourth quarter real exports goods and services were up 4.3 percent in the fourth quarter, following a 4.7 percent increase in the third quarter. And fourth quarter real imports of goods and services ticked up 3.8 percent compared to 1.2 percent in the third quarter.

On the inventories side, Commerce said that the change in real private inventories added 1.88 percentage points to the fourth quarter change in real GDP after a subtraction of 1.35 percentage points from the third quarter change. And private businesses increased inventories $54.3 billion on the heels of a $2.0 billion decrease in the third quarter and a $39.1 billion increase in the second quarter.

Looking at current dollar GDP, which Commerce said represents “the market value of the nation’s output of goods and services,” there was a 3.9 percent—or $144.7 billion gain—in the fourth quarter to $15,320.8 billion, which followed a 4.4 percent $163.3 billion third quarter increase.

On the surface, these fourth quarter GDP numbers look good. And in some cases they match up well with what we are seeing in some specific modes.

Fourth quarter trucking activity saw a nice gain, especially in December, which was spurred in part to holiday shopping. This was also the case with strong package volumes announced by UPS, which really shows no material signs of letting up.

Of course, these things are seasonal, and there are also things to look out for, such as the recent announcement by Commerce that January durable goods orders dipped down, and, of course, the swift increase in gasoline prices…again.

Recoveries don’t happen swiftly, and given the size and scale of what the economy has been through in recent years that is no surprise. But we need all the positive news we can get, which means we should be optimistic about the strong finish to 2011 serving as a springboard for 2012 growth. Here is to hoping it happens.