A swing in inventories flattered the growth in U.S. Q4 GDP, but the trend in final demand remains consistent with a moderate recovery.

The U.S. economy expanded at a healthy 5.7% annualized pace in 2009 Q4, but 60% of this reflected a slower pace of destocking. Final sales rose at a more modest 2.9% pace, following a 2% growth rate in Q3. The economy is moving in the right direction and there are some encouraging pockets of strength. Exports are growing strongly, the drag from residential construction is largely over and companies are beginning to invest. Nevertheless, there will be lingering headwinds to growth from the financial meltdown, such as ongoing credit restraint and an upward drift in the personal saving rate. The U.S. economic recovery should be sustained, but it will fall far short of what would normally occur in the wake of a very deep recession. This means that inflation also will stay low, something that was reaffirmed by the modest Q4 growth in employee compensation.

Source:  www.bcaresearch.com