U.S. Real Growth GDP for Q4 2010 Revised Lower to 2.8% from 3.2%
Economics / US Economy Feb 26, 2011 - 04:27 AM GMTBy: Asha_Bangalore
Downward revisions of consumer spending (4.1% vs. 4.4% advance estimate) and state & local government outlays (-2.4% vs. -0.9% advance estimate) were the two major sources of revisions accounting for the reduction in the pace of growth of real GDP in the fourth quarter of 2010 to 2.8% from 3.2% in the advance estimate. In addition, spending on equipment and software and residential investment expenditures were reported to have advanced at a slower clip in the fourth quarter (see table below).
Despite the downward revision of the growth rate of real GDP in the fourth quarter, the level of real GDP is slightly above the peak reading of the fourth quarter of 2007, indicating that the U.S. economy has entered an expansionary phase of the business cycle.
The economy is projected to grow at a 3.5% pace in the 2011 after a 2.7% increase in 2010 on a Q4-to-Q4 basis. There are several factors that represent a downside risk to the forecast - a larger than estimated reduction in state and local government spending, cut back in federal government spending under consideration, further challenges in the housing market, protracted geopolitical tensions leading to an escalation of oil prices, tepid growth in payrolls, higher food prices, and hard landing in China. Of these, some are more important than others to the extent they have a larger impact on the future path of the economy. There is still room for the Fed to continue to favor growth in the inflation-growth debate.
Asha Bangalore — Senior Vice President and Economist
http://www.northerntrust.com
Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.
Copyright © 2011 Asha Bangalore
The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.
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