Growth in the U.S. gross domestic product during the fourth quarter of last year was estimated at 2.8 percent -- slightly below the consensus expectation of 3.0 percent, but still the best reading in 2011.
However, most of the growth came from inventory rebuilding, which can support GDP growth only temporarily -- and final sales (excluding the inventory effect) rose only 0.8 percent -- according to Nigel Gault, IHS Global Insight's chief U.S. economist. And although consumer spending growth improved, it was still sluggish at 2.0 percent. Moreover, there was a sharp decline in defense spending.
As per the IHS analysis, the GDP growth mix was not encouraging. A rebound in inventory accumulation added 1.9 percentage points to the growth rate. This rebound happened primarily because firms became very cautious in Q3, but when their worst fears over the consequences of the U.S. debt-ceiling debacle and its credit-rating downgrade by Standard & Poor's weren't realized, they rebuilt their inventories in Q4. Gault indicated this was a one-time boost to the GDP growth figure, and the same inventory kick will not happen in Q1 of this year.
The IHS analysis also noted final sales rose only 0.8 percent, although here there were a couple of drags on them in Q4 that probably will not be repeated in Q1, as defense spending and oil-and-gas drilling both fell sharply in the former quarter.
The IHS analysis suggested the rest of the data pointed to continued, but modest, recovery. The growth in consumer spending came in at 2.0 percent, a slower pace than expected, but even achieving that required a lower saving rate because the growth in income was just 0.8 percent. The growth in business-equipment spending cooled down after a spectacular Q3. At the same time, the growth in exports was steady, but still much lower than what was seen in the early stages of the recovery. Meanwhile, spending by state and local governments continued to drop.
IHS concluded the fourth-quarter GDP data do not show the recovery taking off and that they are consistent with continued but gradual improvement. IHS expects growth of about 2 percent, both in Q1 and in 2012.