Analysts surveyed by Thomson Reuters estimate the economy grew 4.5 percent in the final three months of 2009. If so, it would mark the best quarterly performance since 2006. Some predict even more dynamic growth -- possibly hitting 6 percent, a level not reached since 2003.
But many analysts worry that growth could slow or even stop in coming months. They point to temporary factors that propped up the economy in the fourth quarter but will eventually fade.
Much of the fourth-quarter expansion was due to government stimulus and to companies boosting output to restock supplies depleted by the recession. Such inventory restocking boosts production not only at manufacturers but also at their suppliers. That ripple effect can help boost an entire chain of related industries.
Economists estimate two-thirds to three-quarters of the fourth quarter's growth came from the inventory cycle, as companies shifted from sharply cutting stockpiles to rebuilding them or only slightly reducing them.
An increase in inventories, or even just a much slower rate of decline, means companies are producing more goods to fill orders and not shrinking their existing stockpiles.
But government stimulus will eventually be withdrawn. Inventory replacement, too, ends, unless demand picks up. And when it ends, so will the production gains that companies and their suppliers enjoy.
Friday, January 29, 2010
Economy probably grew faster in 4th quarter due to stimulus.
Not a good sign considering its taxpayers money propping up a system that hasn't been allowed to correct itself properly due to Obama's continued interference.