The nation's economy was a bit stronger during the final three months of 2011 than had been initially thought, as the Commerce Department's first revision of the fourth-quarter gross domestic product showed that our economy had improved by 3.0% in the period. That solid rate of growth topped both the initial 2.8% estimated increase and the 2.7% pace that had been forecast for this revision.
In all, the gross domestic product, the broadest measure of all the goods and services produced in the economy, increased by the aforementioned 3.0% in the final period of last year, thereby easily topping the respective increases of 0.4%, 1.3%, and 1.8% recorded for the first, second, and third quarters of last year. The aforementioned gain was also the best since the second quarter of 2010, and easily countered the argument, advanced by some pessimists, that the U.S. economy might well descend into a recession late last year. Clearly, that did not happen.
Helping to drive the late-2011 improvement were revised measures for consumer spending and commercial construction. In all, consumer spending increased by 2.1% last quarter. The so-called advance estimate of GDP growth had that metric increasing by 2.0%. Also, spending on commercial construction decreased by less than had initially been estimated during the period. Overall, nonresidential construction rose by 2.8% in the most recent three months. That was up from an earlier estimate of 1.7%.
Meanwhile, a major driver in the period's growth was businesses restocking their shelves in the hopes of meeting stepped-up demand for goods produced in the nation's factories. Such inventory accumulation adds to GDP, but can subtract from future demand, as businesses seek to get supply and demand back into better balance. Encouragingly, Commerce revised downward its inventory growth estimate for the quarter. That downward revision should help underlying growth in the current quarter. For the current three months, we expect growth to come in at 2.0%-2.5%, with the risk being to the upside, in our view. Indeed, we would not be surprised to see the expansion pace track nearer to the high end of that range, especially if the weather continues to cooperate in March.
Going forward, we are concerned by soaring oil prices, especially the more elevated quotations for gasoline at the pump. We are, in fact, seeing many stations selling such fuel for more than $4.00 a gallon, and fears are increasing that gas could reach the $5.00-a-gallon level by the peak driving season over this summer. Such an unwelcome occurrence could well constrain GDP growth later on this year, and combined with a presumptive recession in the euro zone could cap U.S. GDP growth at 2%, or less, in the final half of 2012, although we still do not envision a recession evolving along our shores.
For now, though, this was an encouraging report, and it could well lay the ground work for not only a decent opening-quarter GDP report, but also for a similar gain in the upcoming three months.
At the time of this report's issuance, the author did not have positions in any of the companies mentioned.