Reply #1: Market WrapUp: Tailwinds Become Headwinds [View All]

[ozymandius]

A Look at the Q4 GDP Report
BY CHRIS PUPLAVA

Economic growth decelerated sharply from the 4.91% annualized growth rate seen in the Q3 2007 to 0.64% in Q4, nearly coming in at only half of the 1.2% consensus growth rate reported by Thomson Financial. The deceleration in growth came from a fall in inventories and weaker growth in federal spending, consumption, and exports.
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Breaking down the GDP report by components, consumption grew 1.97%, fixed investment fell 2.58%, exports rose 3.89%, imports rose 0.32%, and government expenditures rose 2.6%. In terms of contributions to percent change in real GDP, positive growth came from personal consumption expenditures, net exports of goods and services, and government expenditures, which added 1.37%, 0.41%, and 0.50% respectively. Subtracting from growth was gross private domestic investment, which subtracted 1.64% from total GDP growth.
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What is interesting to note, and which helps explain why the decline in residential fixed investment hasn’t had a more drastic affect on GDP growth, is that the growth in real nonresidential fixed investment in 2007 completely offset the decline in residential fixed investment. In 2007, real nonresidential fixed investment grew by $97.9 billion while real residential fixed investment fell by $96.7 billion, more than offsetting the entire decline from the housing recession.
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Today’s Market

The markets traded flat for most of the day before vaulting northward once the Fed announced it would cut interest rates by half a percent. The Dow Jones Industrial Average rose nearly 230 points after the announcement before giving back all of the gains on the day to finish in negative territory as investors locked in short-term gains amidst worry of a slowing economy.

http://www.financialsense.com/Market/wrapup.htm