Turns out the U.S. GDP grew 5.9% in the fourth quarter of 2009 compared to the initial 2.7%. However, the actual sales to consumers was lower than originally reported while inventory replenishment was larger.
Nearly two thirds of the growth in GDP in the fourth quarter was accounted for by changes in inventories, not by final sales. Businesses had been reducing their overstocks at the fastest pace in generations earlier in the year, and then sharply slowed the pace of reductions in the fourth quarter. The slowdown accounted for most of the fourth-quarter growth.
Although GDP grew at the fastest pace in six years, final demand in the economy was tepid, rising 1.9% annualized, revised down from 2.2% earlier. Excluding exports, final sales to U.S. purchasers rose at a 1.6% annual rate.
While a positive GDP is a good thing, I just have to wonder if this is really an anemic number. In previous recessions, the U.S. saw sizable GDP growth coming out of recessions, especially recessions as deep as this one.
What also alarms me is the amount of fiscal and monetary stimulus injected into the economy, and this is the best we can get. I have seen estimates that state we have pumped in ten times the average stimulus from previous recessions. In the typical recession since WWII, the U.S. has stimulated at about 2.9% of GDP. For this recession, we have injected 29% of GDP. This is enormous and unprecedented.
Just look at the Fed’s balance sheet. It has expanded by a factor of four while the money supply has doubled in less than a year.
Ordinarily, throwing this much money at the problem should result in a more robust recovery. What is it saying when we only get an increase in GDP that is half of the normal post-recession bounce?