2011 Economic Calendar
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GDP  
Released On 3/25/2011 8:30:00 AM For Q4(f):2010
PriorConsensusConsensus RangeActual
Real GDP - Q/Q change - SAAR2.8 %3.0 %2.8 % to 3.4 %3.1 %
GDP price index - Q/Q change - SAAR0.4 %0.4 %0.4 % to 0.6 %0.4 %

Highlights
It turns out that the economy at the end of 2010 was about as strong as most had expected all along. Fourth quarter GDP growth was bumped back up to 3.1 percent annualized growth from the second estimate of 2.8 percent. The latest estimate came in slightly higher than the consensus forecast for 3.0 percent. As with the prior estimate, the fourth quarter was still stronger than the third quarter pace of 2.6 percent.

The upward revision to fourth quarter growth primarily reflected stronger inventory investment, nonresidential structures, equipment & software, and residential investment. Downward revisions were seen in net exports and government purchases.

Demand numbers were little changed. Final sales of domestic product were unrevised net from the second estimate of 6.7 percent. Final sales to domestic purchasers (takes out net exports) were revised up marginally to 3.2 percent from the second estimate of 3.1 percent for the fourth quarter.

Year-on-year, real GDP in the fourth quarter is up 2.8 percent, compared to 3.2 percent in the third quarter.

On the inflation front, the GDP price index was unrevised compared to the second estimate of 0.4 percent. Analysts had expected 0.4 percent.

The latest estimates for GDP and components indicate that the economy had moderately strong forward momentum at the end of 2010. More recent monthly numbers show overall momentum continuing but very mixed by sector with manufacturing, export, and consumer sectors leading growth and with housing, commercial real estate, and state & local government sectors weighing on growth.

On the news, markets were little changed.

Consensus Outlook
GDP for fourth quarter turned out to be not as strong as initially estimated. Fourth quarter GDP growth was revised down to 2.8 percent annualized growth from the advance estimate of 3.2 percent. However, the fourth quarter was still marginally healthier than the third quarter pace of 2.6 percent. Notably, demand numbers were revised down somewhat. Final sales of domestic product were bumped down to 6.7 percent from the initial estimate of 7.1 percent. Final sales to domestic purchasers (takes out net exports) were nudged down to 3.1 percent from the original estimate of 3.4 percent for the fourth quarter. Nonetheless, the revised final sales numbers indicate that there still is moderately strong demand. On the inflation front, the GDP price index was little revised, coming in at 0.4 percent, compared to the initial estimate of 0.3 percent.

Definition
Gross Domestic Product represents the total value of the country's production during the period and consists of the purchases of domestically-produced goods and services by individuals, businesses, foreigners and government entities. Data are available in nominal and real (inflation-adjusted) dollars, as well as in index form. Economists and market players always monitor the real growth rates generated by the GDP quantity index or the real dollar value. The quantity index measures inflation-adjusted activity, but we are more accustomed to looking at dollar values.

Household purchases are counted in personal consumption expenditures -- durable goods (such as furniture and cars), nondurable goods (such as clothing and food) and services (such as banking, education and transportation). Private housing purchases are classified as residential investment. Businesses invest in nonresidential structures, durable equipment and computer software. Inventories at all stages of production are counted as investment. Only inventory changes, not levels, are added to GDP.

Net exports equal the sum of exports less imports. Exports are the purchases by foreigners of goods and services produced in the United States. Imports represent domestic purchases of foreign-produced goods and services and must be deducted from the calculation of GDP. Government purchases of goods and services are the compensation of government employees and purchases from businesses and abroad. Data show the portion attributed to consumption and investment. Government outlays for transfer payments or interest payments are not included in GDP.

The GDP price index is a comprehensive indicator of inflation. It is typically lower than the consumer price index because investment goods (which are in the GDP price index but not the CPI) tend to have lower rates of inflation than consumer goods and services. Note that contributions of each component, as averaged over the prior year, are tracked in the table below (components do not exactly sum to total due to chain-weighted methodology). Consumption expenditures, otherwise known as consumer spending, has over history been steadily making up an increasing share of GDP.  Why Investors Care
 
[Chart]
Real GDP growth is always quoted at a quarterly annual rate. It measures how much the economy has grown over a three-month period. Quarterly growth rates are often volatile; consequently, economists also like to look at the year-over-year growth in GDP. The yearly changes tend to be more stable.
Data Source: Haver Analytics
 
[Chart]
It is common to compare quarterly changes at annual rates in the GDP deflator. These can be volatile, just like the quarterly swings in real GDP growth; as a result, the trend in inflation is better determined by year- over- year changes.
Data Source: Haver Analytics
 
 

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