The headline number on the Gross Domestic Product (GDP) for the fourth quarter of 2009 came in a 5.7%. The expectation was for 4.7%. However, we can expect revisions over the next couple months, which typically pulls this number down as evidenced by the third quarter’s number that initially rang in at 3.5% but has now dropped to 2.2%.
What scares me about this number is it is a huge number, but the recent quarterly profit reports aren’t showing large revenue growths. Many folks will point to how most companies, almost 70%, are topping earnings forecasts. However, the revenues are still coming up light. With a near 6% increase in GDP, shouldn’t we see higher revenues? Also, it appears a large percentage of the GDP growth was due to inventory restocking. This is usually a temporary stimulant.
If the economy cools after the Christmas buying season and the inventory restocking moderates, we will see a big hit to corporate earnings.