GDP Adjusted Lower, But Economy Is Still Growing

Wall Street may be stumbling slightly after the downward revision of the gross domestic product for the final quarter of 2009, but the news still suggests our economy is on the rebound.

Real GDP, a measure of the output of goods and services produced by labor and property in the country, increased from the third quarter to the fourth at an annual rate of 5.6 percent in 2009, according to the third (and final) estimate released by the Bureau of Economic Analysis Friday. That's a big leap over the 2.2 percent increase in the third quarter.

The number was revised down from the 5.9 percent estimate reported last month. The federal government provides three estimates of economic growth, each reflecting more complete information than the last.

Even with the downward revision, the US economy still grew at the fastest pace in six years during the final three months of 2009, fueled by inventory adjustment, strong business investments and consumer spending, reports MarketWatch.

Businesses had been reducing inventories at the fastest rate in decades, but slowed reductions in the fourth quarter, which accounts for much of the rise in GDP.

In the past year, real GDP has risen a modest 0.1 percent, but that's not so bad when you consider that for all of 2009, GDP fell 2.4 percent.

Economists are forecasting a slowdown to approximately 2.8 percent annualized growth for the first quarter of this year, which ends next week. Those consulted by MarketWatch said they believe growth will slow in 2010 to about 3 percent once the inventory boost steadies and the impact of the economic stimulus wanes.

In the fourth quarter of 2009, before-tax profits increased $108.7 billion, or 8 percent over the third quarter suggesting continued growth and job gains as early as the second quarter of this year.

Looking back on 2009, it really was an epically-bad year for the economy. Even with the slight rebound in the second half of the year, it was the worst year for GDP since 1946. Perhaps the best news of all is that the year is behind us.

Photo by Fortyseven via Flickr.