Friday, January 30, 2009

GDP Better Than Expected But....

The advance estimate of 4th quarter 2008 GDP came in at a better than expected decrease of 3.8%. The expectation was for a decline of 5.5%. The full release can be found at the Bureau of Economic Analysis website.

The better than anticipated results can be attributed to the real change in private inventories that added 1.32 percentage points to the fourth-quarter change in real GDP. The issue with this inventory build is sales are not keeping pace with the rate of increase. The inventory to sales ratio has increased significantly as noted in the below chart. The data for the chart is through 11/1/2008.

(click to enlarge)

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