Final 2009 economic reports show a glass half full

The signicant strides of recovery are in fuller evidence with final reports for the final quarter of 2009 now being published, however the ‘jobless recovery’ is more apparent before as growth is occurring without the positive impact to a reduction in the numbers of the unemployed.  Government reports in the US published this week show that the U.S. economy grew at a marginally faster pace than had been forecasted for Q4 2009. The ability to retain this level of growth in 2010 will be the challenge but for the time being the accomplishments of Q4 are being heralded as signs that confidence will be boosted as a direct result. US Gross Domestic Product increased at an annual rate of 5.9% for Q4 2009 versus original predictions of 5.7% portrayed in January.

So how best to interpret this? It is one of the most significant indicators that the deep trough of the prior 2.5 years is over and that the growth which represents the greatest improvements in six years has left experts in almost uniform agreement that the recession technically concluded during Q2 2009.  The positive conclusion to 2009 doesn’t come close to offsetting the economic shrinkage and turmoil of the earlier part of the year, the depth of the crash is measure by the annual GDP drop of 2.4% which represented the greatest decline since 1946, then a post war America tried to find employment for returning soldiers in an industry that had been fully retuned for the war effort. As a business owner the advice is to hold cautious optimism when attached to the recovery which isn’t steely in construct, watching the banks to ensure that interest rates remain low throughout 2010 and into the new year is a practice that should be adopted. As I’ve mentioned before the changes are more apparent at the corporate level than they may be for the people on your street, as job losses continued in 11 of the 12 months of the year just ended. The next sign of an economy transforming will be the reduction in unemployment and even the most optimistic anticipate we may not see that change show significance until Q3 2010.

Loosening credit lines for smaller business and the consumer to engage in hiring and spending is not occurring at a rate that supports an even pattern of growth and while banks are gradually showing the capacity to lend money again, the recipients have tended to primarily be the bigger corporations. This perception or actuality needs to change for the recovery to gain more traction, small business still feels handcuffed by the struggle to acquire or further credit, while consumer spending reflects the same restrictions. Confidence itself may be the most fragile aspect of the return to growth an obvious by product of having weathered the last three years.  Robert Dye, senior economist with PNC Financial Services summed it up in more edible terms.

“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”

The disparity in balance is also evidenced when further researching the GDP reports, spending by individuals for Q4 increased by just 1.7% which falls comfortably in the shadow of the overall figure of 5.9%. The positive numbers being carried by corporate and government spending instead of the consumer. The biggest component of increased spending was businesses that had cut inventory down to the bone earlier in the year due to the caution being advised essentially resulted in ‘shelves being empty’ thus the new investment in equipment and supplies resulted in a huge spike of 18.2% for the quarter. Government spending on aggregate showed a 6.0% hike with non defense spending driving those results. The dollar exchange rate coupled with a global recovery also plays a significant part in the quarterly changes which assisted exports growing by some 22% for Q4.

More to follow, statistics for this report courtesy of CNN Money.