Tuesday, February 7, 2012

USA Fourth Quarter GDP Estimated at +2.8%, 6-Quarter High

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USA GDP Q4 2011 Advance Estimate The Bureau of Economic Analysis released the advance estimate of Q4 2011 GDP which was +2.8% QoQ, for a total GDP of $15.294 trillion (annualized). This is a 6-quarter high, the highest since Q2 2010 (+3.8%). The GDP has increased for 10 consecutive quarters, since Q3 2009, although growth rates have ranged from a near-abysmal +0.4% in Q1 2011 to an encouraging +3.9% in Q1 2010. There will be second and third estimates announced in February and March, respectively.

Where is the USA Economy Going? The Big Question: where is the USA economy headed? Three scenarios are usually discussed: 1) a double dip recession whereby the GDP will turn negative yet again with a higher unemployment rate, 2) the economy will continue "bottom bouncing" with slow to very slow growth and a continuing relatively high unemployment rate, or 3) the bottom is in and GDP growth will accelerate and the unemployment rate will begin to decrease. Scenario 2) with slow to very slow economic growth and a continuing relatively high unemployment rate appears to be the most likely scenario for 2012, with an annual GDP growth projected of approximately +2.0% or less. The average of the 4 quarters reported by the Bureau of Economic Analysis in 2011 is +1.58% (Q1 +0.4%, Q2 +1.3%, Q3 +1.8%, Q4 +2.8%).

USA Real GDP % by Quarter (seasonally adjusted at annual rate) A negative drop into the Great Recession began Q3 2008, followed by a plunge in Q4 2008. The Great Recession continued for 4 quarters until Q2 2009. Positive GDP growth resumed in Q3 2009, the rebound peaking in Q1 2010 at +3.9%, and has continued for 10 consecutive quarters.


USA Real GDP $ by Quarter (seasonally adjusted at annual rate) The USA GDP pre-recession peak was Q2 2008 and the Great Recession low was Q2 2009. USA GDP has now increased 10 consecutive quarters. The Q4 2011 GDP (annualized) exceeds both Q2 2008 ($14.416 trillion) pre-recession peak and the prior Q3 2011 peak ($15.176 trillion) to reach an all-time high of $15.294 trillion.


Commentary The Q4 2011 USA Quarterly GDP (advance estimate) of +2.8% is a 6-quarter high and encouraging, even though below expectations. Our bearish estimate of the USA Quarterly GDP QoQ for Q4 2011 was +2.25% or less. We now raise our estimate to a still bearish +2.50% or less and expect the BEA advance estimate to be lowered. A recession in 2012 does not appear probable, but continues as a low risk.

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