4Q09 GDP +5.9%, But Consumer Spending Down. View GDP Last 9 Quarters and Charts.

The second of three 4Q09 GDP readings came in today at +5.9%, making a second consecutive quarter of positive GDP growth after four consecutive quarters of economic contraction (a 60yr record for consecutive GDP declines). The strong initial GDP reading was due largely to acceleration in private inventory investment, a deceleration in imports, and an upturn in nonresidential fixed investment that were partly offset by decelerations in federal government spending and in Personal Consumption Expenditures (which we’ll hear more about Monday). Real GDP in 2009 declined -2.4% versus a +0.4% gain in 2008.

Stocks are up modestly on this GDP update today and bonds (including Treasuries and Mortgages) are up about 22 basis points, which is a big gain. The main reason seems to be because increasing inventories isn’t viewed by markets as a meaningful or sustainable contributor to GDP growth. Consumer Spending needs to be higher before any sustained GDP growth can occur, and the data don’t suggest we’re there yet. All GDP figures are ‘real’ or inflation-adjusted, and the next reading will come on March 26. The last nine quarters of GDP are at the bottom of this post, and you can also visit our Data section to see historical GDP figures, graphs and download data.

As of November 25, 2008, -0.5% GDP was the largest quarterly decline since the tail end of the last recession in 2001. Six days after that release (and about one year back from today), the NBER declared a recession had been in effect since December 2007 and also countered the popular definition of recession as two consecutive quarters of negative GDP growth, saying that they evaluate many factors in addition to GDP. This falls well in line with the beginning of the credit crunch in August 2007 and the multi-layered factors that have led to the recession that’s lasted two years. Recession beginnings and endings are always officially called after the fact, and while 3Q and 4Q GDP certainly suggest a recovery, 10% unemployment suggests otherwise. Here is the press release for today’s figures.

4Q2007: -0.2% (final)
1Q2008: +0.9% (final)
2Q2008: +2.8% (final)
3Q2008: -0.5% (final)
4Q2008: -6.3 (final)
1Q2009: -6.4% (final)
2Q2009: -0.7% (third reading, formerly known as final)
3Q2009: +2.2% (third reading, formerly known as final)
4Q2009: +5.9 (second of three readings)