US GDP: Looks may be deceiving

US fourth quarter GDP looks strong, but it's largely due to inventory restocking.

Today, the Bureau of Economic Analysis (BEA) released their second installment of the Q4 2009 GDP report showing that the economy expanded significantly with real GDP increasing at an annualized rate of 5.9% from Q3.

On a year-over-year basis real GDP was just barely positive coming in at just 0.15% while the quarter-to-quarter non-annualized percent change was 1.45%.

It's important to recognize that the majority of this growth is the result of inventory restocking, growth in fixed non-residential equipment and software investment as well as a notable growth in exports of goods.

Change in private inventories alone accounted for 3.88% of the percent change in real GDP.

Residential fixed investment was revised down to an annualized increase of 5.0% but likely still has further downward revisions to come in benchmark releases.

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