GDP Is Down but the Economy Will Be Fine
NEW YORK (TheStreet) -- There are two ways to look at the big downward revision in the government's estimate of fourth-quarter growth Friday, where the Commerce Department said gross domestic product rose at a 2.4% annual rate, instead of the 3.2% rate first estimated last month.
The funny version (apologies to the makers of the board game Clue): Who killed the recovery? The Republicans. In the House. With a budget axe.
The serious version: Nobody, really. The revisions still show solid growth that sets the stage for a better 2014, but with more short-term blips than we thought from the October government shutdown. The recovery is fine, if you know what to look for.
But this isn't as bad as it looks, for reasons I'll explain.
The private economy is now growing at a 3.5% annual rate, which is more than respectable. Growth in consumer spending accelerated, and consumer spending is 70% of the economy. The investment number, while not great, included a 10.6% annualized jump in equipment spending and an 8% rate of increase in spending on software and research and development.
That's Corporate America putting some of its giant cash pile to work as seed corn -- as it is supposed to do in a recovery just beginning to accelerate. This is what a gathering recovery looks like.
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