good summary, i think
Fri Jan 27, 2012 4:34:07 pm

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U.S. GDP grew at fastest pace in 1.5 years in fourth quarter 2011


By Peter Whoriskey, Updated: Friday, January 27, 10:24 AM

The nation’s on-and-off economic recovery has picked up its pace, the Commerce Department reported Friday, with the U.S. economy growing at an annualized rate of 2.8 percent for the end of 2011.

That rate is the fastest recorded in a year and a half, and it follows three quarters of growth below 2 percent.

Over all of 2011, the economy grew at a rate of 1.7 percent.

But behind the accelerating growth figures lurked lingering signs of trouble, especially for the nation’s households, and questions about whether the economy’s growth rate is sustainable, economists said.

U.S. stocks opened slightly weaker on the news, and the Dow Jones Industrial Average was down about half a percent by mid-morning.

With the state of the economy expected to be a key element of the 2012 presidential campaign, the details of the Commerce Department report on gross domestic product - the value of goods and services produced in the United States - reflected the frailty of the overall economy despite record corporate profits.

Some of the acceleration in growth rate was triggered by consumer spending, which rose by two percent. But that was achieved in part because people saved less - the personal savings rate fell again, as it has for each of the last four quarters. In addition, even though employment is up, disposable personal income is slightly less than it was a year before.

“That’s a very disappointing outcome,” said Paul Ashworth, chief U.S economist for Capital Economics. “You would expect that the income earned by everybody would be going up.”

The other key reason for the growth in GDP is that companies built up their inventories of goods. Several economists suggested that those inventories will exceed sales, meaning that companies are likely to slow down production.

“The current build rate appears out of line with demand,” said Steven Ricchiuto, chief economist at Mizuho Securities USA, noting that the inventory buildup was largely auto-related.

More generally, while the tentative recovery seems to be lifting businesses, and adding some jobs, households appear to be under considerable strain.

With this year’s growth, the nation’s GDP now exceeds its size before the recession. And the GDP numbers come on the heels of 22 straight months of job increases, with the economy adding 200,000 jobs in December.

But employment numbers continue to lag far behind their pre-recession levels of more than three years ago, and this disconnect spreads a sense of gloom among many households.

The employment level is still down about 6 million from its peak of about 146 million just before the downturn.

“That’s why people feel we’re still in recession,” said Gus Faucher, senior economist at PNC Financial Services.

Many firms, though profits are high, are reluctant to hire.

“Businesses have just been really really scared by what we’ve been through,” Faucher said. “Once they’re convinced things wont go to hell again, there will be some demand for labor. We’re getting close to that point.”

The numbers released Friday also underscored the stop-and-start nature of the recovery thus far: While the economy grew at a 3 percent pace in 2010, it slowed to a 1.7 percent rate in 2011.

The slowdown defied predictions made at the beginning of 2011, when many economists forecast a year of robust growth. Then a combination of the earthquake in Japan, the monetary troubles in Europe and the debt ceiling standoff in Congress put the economy off course.

Now many forecasters and businesses are fearful of being too optimistic.

“Even though things feel better at the moment, people don’t want to make the same mistake,” said Mark Zandi, chief economist at Moody’s Analytics. “The forecasts are much more cautious. This collective psyche is very fragile.”

Moreover, he said, fear about the potential impact of Europe’s economic woes and the still-troubled U.S. housing housing market keep a steady drag on the economy.

“As long as home prices are falling, and they still are, it’s hard to get enthusiastic about anything,” Zandi said.


Staff writer Sarah Kliff contributed to this report.

http://www.washingtonpost.com/business/economy/us-economy-grew-at-fastest-pace-in-15-years-in-q4-2011/2012/01/27/gIQA1r8IVQ_story.html