In 2009Q4, US GDP grew by 5.9% at annual rates; the number was 5.0% in Canada. But our news was much better. Here is a graph of the contributions to GDP growth by expenditure category:
US GDP growth would have been only 2.0% without the contribution of the inventory terms (which was itself a deceleration in the rate at which stocks were being drawn down.) In Canada, the 2009Q4 GDP number would have been 5.8%.
And look at the contribution of government spending. In the US, the contribution was negative: the increase in federal spending was more than compensated by cutbacks at the state level.
It's easy to see why the Canadian numbers were greeted with more enthusiasm than were those in the US, even though the headline number was smaller. Growth was evenly distributed across all types of expenditures, and we can expect inventories to bounce back as well fairly soon.
Too bad our 2% in consumption growth was largely structural deficit. By this I mean households borrowing large sums of money to get in on a real estate bubble before it pops.
Posted by: asp | March 09, 2010 at 09:49 AM
Inventory management is a key aspect of recessions.
I would have expected inventories to have adjusted much faster this recession than previous ones; thanks to greater use of information technology (IT), and just-in-time (JIT) inventory management. If I recall, US firms quickly slashed inventories in late 2008. All this to say that the build in US inventories could be interpreted as bullish.
Posted by: westslope | March 09, 2010 at 05:42 PM
Except that it wasn't a buildup of inventories in the US. It was just a slowdown in the rate of inventory depletion. The inventory change term was still negative, but less negative than in 2009Q3.
Posted by: Stephen Gordon | March 09, 2010 at 05:54 PM
Right you are. Not a build but a decrease in the rate of depletion.
Posted by: westslope | March 09, 2010 at 06:31 PM