Good news and bad news on GDP
GDP grew at 3.2 percent in the fourth quarter of 2011, which isn't too bad. And as Neil Irwin notes, the underlying data is even a bit better than that. The topline number was a bit depressed, as businesses cut back on their inventory stock a bit. But those inventories will come back, and that restocking might actually boost GDP growth this quarter. Meanwhile, "final demand, which excludes that inventory swing and is a good indicator of the underlying pace of growth, rose at a whopping 7.1 percent, the strongest since 1984." So good work, American economy!
But before you get too excited, here's Paul Krugman with some cold, cold water:
Today’s GDP report puts real GDP basically back where it was in the 4th quarter of 2007 (1/10th of a percent higher, but who’s counting?) Based on the trend between the previous two business cycle peaks, the economy should have grown — had the capacity to grow — around 2.3 or 2.4 percent per year over that period, so we’re actually around 7 percent below where we should be.
And growth is chasing a moving target: growth at 3.2 percent closes less than 1 percentage point of that gap each year.
So, yippee: we’re on track to restore full employment circa 4th quarter 2018.
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