Sustainable Surge in U.S. Growth?

(Export Development Canada – Peter G. Hall)

The U.S. economy surprised everyone in the closing months of 2009. Preliminary figures show the economy churned out impressive 5.7% annualized growth. As the U.S. led the world into recession, it is expected to lead us out. Does the fourth-quarter, 2009 surge herald the beginning of recovery?

Although unusual, quarterly growth at this pace has been seen before, sometimes in the middle or close to the peak of an economic cycle. But in past U.S. experience, rapid quarterly gains often occur just after a period of recession – the recovery phase of the cycle – and have been known to last for 3-5 consecutive quarters. The timing seems to be right; is this burst of growth sustainable?

A quick scan of the sources of growth shows a varied picture. Inventory stabilization played a huge role, accounting for 60% of quarterly growth. This is a strong signal, indicating that the U.S. economy is returning to balance. However, consumer spending, a key engine of global demand, produced a lukewarm 2% gain, weaker than third-quarter growth and a sign that Americans are still moving forward with caution. In contrast, red-hot export growth added more to bottom-line GDP than all of consumer spending, although exports are just one-sixth the size of the US consumer sector. Read the complete article and/or watch the video here.