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Prospects Daily: U.S. Q4-2009 Real GDP growth revised up slightly

Global Macroeconomics Team's picture

Important developments today:

1. U.S. GDP growth for Q4-09 revised up slightly

2. U.S. existing home sales tumble.

3. Japanese indicators shift upward, but deflation remains

U.S. GDP growth for Q4-09 revised up slightly. The Commerce Department today marked-up GDP growth for the fourth quarter to 5.9% from the initial estimate of 5.7% released last month. The improvement in growth—which marks the best performance in over six years—was the result of a larger that previously reported contribution from inventories, which added 3.9 points to growth in the quarter compared to 3.3 points earlier estimated. Business investment also grew at a substantially faster pace, up 6.5% (3.5%) with spending on equipment jumping 18.2% vis-à-vis 13.3% earlier believed. Consumer spending, however, grew more sluggishly, by 1.7% for the quarter compared to 2% earlier, leading to a reduced contribution to overall growth of 1.2 percentage points compared to 1.4 in the first release.

U.S. existing home sales tumble. The number of previously owned single-family homes in the United States sold in January dropped for a second month running in another sign that the federal tax credit program appears unable to generate demand as effectively as it did over the third quarter of 2009. January sales dipped 7.2% (m/m) to an annual rate of 5 million, from 5.4 million in December, dropping close to the weakest sales volumes last seen in late 2008. Momentum in home sales (rolling quarterly average, saar) also continued to diminish, registering growth of 11% in January, down substantially from the 43% recorded in November 2009.

U.-Michigan/Reuters consumer sentiment fell in February to 73.6 from 74.4 in the previous month, a clear downdraft, though not of the depth witnessed in the Conference Board survey returns for the month. Concern over jobs is weighing heavily on households in the current environment, with new claimants for jobless benefits increasing to a three-month peak last week. Furthermore, the weakness in the housing market, which is undergoing a sharp contraction in home sales, has consumers concerned about declining property values once more.

Japanese indicators shift upward, but deflation remains. Reports today tend to confirm that the pace of growth set by the Japanese economy during the final quarter of 2009 (GDP up 4.4%, saar) is being maintained during the first months of 2010. Recent trade information showed exports advancing at the fastest pace in more-than 30 years in January (driven by surging Chinese and other East Asian demand), and industrial production has now echoed the advance, picking-up 2.3% in the month following a 2.2% gain in December. The resultant momentum of factory output stands at 23.4% (saar) up from 19.7% during the fourth quarter—favorable for a step-up in job creation. Today’s production numbers suggest that the economy will keep expanding on the back of Asian demand, while capital outlays of large Japanese manufacturers accelerate.Moreover, retail sales volumes turned positive for the first in 16-months, picking up 0.4% (y/y) in January despite a souring of Tokyo consumer sentiment. But Tokyo-CPI continued in deflation, dropping 1.8% in February (y/y) but marking an improvement from January’s 2.1% decline. Finally the intermediate prices measured by the corporate goods price index also marked improvement, falling 2.1% from year earlier levels in January contrasted with a 3.5% slide in the month preceding.