Picture du Jour: GDP – what it really looks like

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By now we all know that a swing in inventories flattered the growth in U.S. Q4 GDP. The chart below, courtesy of Goldman’s chief US economist Jan Hatzius (via Clusterstock – Chart of the Day), shows the “real” story. It illustrates that the growth in real final demand – basically GDP excluding inventory restocking – is flat and doesn’t live up to past recoveries at all.

“There will be lingering headwinds to growth from the financial meltdown, such as ongoing credit restraint and an upward drift in the personal savings rate. The U.S. economic recovery should be sustained, but it will fall far short of what would normally occur in the wake of a very deep recession,” said BCA Research.

Without stronger demand growth, a V-shaped recovery is not on the cards and the unemployment rate will not start heading south.


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