As recoveries go this is one of the oddest. There is no denying that the US economy continues to return to its once fabled glory; it is simply not embraced, believed, or yet noticed by the average American.
A group responsible for over seventy percent of the economy’s machinations just doesn’t see it primarily due to housing prices and unemployment rates that are expected to hover around 10% for the remainder of 2010. Given unemployment’s firmly entrenched ties to consumer confidence the economy should only post modest gains throughout the year as consumers continue to keep their belts tightened.
Fourth Quarter GDP growth, the broadest of economic indicators, showed a humble improvement over forecasts at 5.9%. Despite this growth it was not enough to make up for early declines in the first two quarters of 2009 that left the GDP contracted by 2.2%, the biggest post World War II decline.
In a folksy iteration that would do Sarah Palin proud Robert Dye, senior economist at PNC Financial Services Group, harkened back to a Miller Lite ad campaign stating,”The fourth quarter GDP revision tastes great, but is less filling. We need the meat and potatoes of private-sector job creation in order to sustain this recovery.” Hell will host a winter olympics before I will ever appreciate metaphors from economists, but Mr. Dye does explain the situation well in spite of his attempts at whimsy.
The bulk of this growth, and another reason the average American isn’t truly appreciating the fact that the economy is recovering from its biggest downturn since The Great Depression, was in business spending to replace the slashed inventories of the first two quarters. This growth, unfortunately, is expected to slow as inventories are replenished and the economy should show considerable more modest growth through the next two years. In all likelihood somewhere in the neighborhood of 3.2% for 2010 and 3.3% for 2011.