Economic Commentaries

Entries for January 2011

30

The government reported that real GDP rose at a 3.2% annual rate in last year’s final quarter while final demand was a much faster 7.1% rate. Consumer spending and a narrower trade deficit paced the advance, while business investment growth slowed and government outlays contracted, particularly at the state and local level. For the full year real GDP growth was 2.9%; inflation was 1.3%; and the jobless rate averaged 9.6%.

For the current year analysts are more upbeat in suggesting faster economic growth, but only halting progress in reducing joblessness. The Federal Reserve is continuing to do its level best to support this outcome and make it even better. At this past week’s FOMC meeting the Federal Reserve acknowledged that the economic climate is showing some improvement, but that low inflation and unacceptably high unemployment will cause it to remain very accommodative for an extended period. Analysts typically interpret extended period to mean at least six months. We interpret it to mean considerably longer.

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