The U.S. Commerce Department released revised fourth-quarter GDP numbers yesterday. The headline figure was revised up from 2.2% to 2.5%, which is encouraging. But dig a little deeper and you'll find a few reasons for concern. Here are the key passages from Reuters:
U.S. economic growth at the close of 2006 was revised up, according to a government report on Thursday that identified rising stocks of unsold goods as a key reason and cast a shadow over future prospects.
The Commerce Department said gross domestic product, measuring total goods and services output within U.S. borders, grew at a 2.5 percent annual rate instead of the 2.2 percent reported a month ago, up from 2 percent in the third quarter....
The GDP report showed inventories rose more than first thought at the end of last year, which could lead businesses to hold back future production. In addition, spending on new-home building plunged again and investment by businesses softened more than thought earlier....
Business investment spending fell at a 3.1 percent annual rate in the fourth quarter rather than the 2.4 percent decline the government estimated a month ago. That contrasted with a 10 percent third-quarter jump.
Spending on new-home building plummeted at a 19.8 percent rate -- steeper than the 19.1 percent fall estimated a month ago -- after an 18.7 percent drop in the third quarter.
It was the fifth quarter in a row that residential spending has fallen and the steepest since a 21.7 percent plunge in the first quarter of 1991 when the economy was on the brink of recession....
There was a significant downward revision in spending on equipment and software, which dropped at a 4.8 percent annual rate in the fourth quarter instead of 3.2 percent. That was the biggest decline since 4.9 percent in the fourth quarter of 2002 and a sharp turnaround from the third quarter when equipment and software spending grew at a 7.7 percent rate.
Companies added to inventories at a $22.4 billion annual rate in the closing quarter of 2006 rather than the $17.3 billion rate it reported a month ago and that was the main reason for the upward revision in fourth-quarter GDP.
Glenn Somerville, "U.S. Q4 GDP revised up on inventories," Reuters, U.S. News, March 29, 2007