Taking Apart the Tainted GDP Data
For more commentary from Tony Crescenzi and his instant reactions to the latest economic news, check out his blog on RealMoney.com.
According to the latest gross domestic product data, the U.S. economy expanded faster than expected in the fourth quarter, at a 3.5% pace compared to the forecasts for 3.0%. This gain followed subpar growth in the previous two quarters.
These fourth-quarter data are strong enough to keep the Federal Reserve on the sidelines. Although growth did accelerate, those who are bearish on the economy will seize upon some important factors in the GDP report:
- A decrease in business spending
- Sharp weakness in residential investment
- High government spending
- Lackluster nominal personal spending.
Business SpendingFirst, business spending fell during the quarter, with spending on equipment and software falling at a 1.8% clip. That's the second decline in three quarters and the largest since the fourth quarter of 2002. The weakness is likely a response to the anemic GDP reports of the past two quarters, and businesses were probably concerned about growth prospects in light of the sagging housing sector and high energy costs that existed at that time. Business spending will probably pick up in the first quarter in response to the decline in energy costs and signs of bottoming in home sales.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV