Market Review, January 2012

U.S. real GDP grew at an annual rate of 2.8% in the final quarter of 2011, according to the advance estimate released by the Bureau of Economic Analysis. This was the fastest pace in the last five quarters although it was slightly lower than the consensus estimate of 3%. The acceleration in GDP was primarily boosted by the rebuilding of business inventories (blue bar in the chart below) and growth in personal consumption expenditure (red bar), contributing 1.94 and 1.45 percentage points respectively. The growth was partially offset by a decrease in federal and state government spending and on acceleration in imports. Real final sales (GDP less inventories) rose 0.8%, the slowest pace since the first quarter and significantly below the consensus of 2.5%, indicating poor demand during the holiday quarter.