GDP for the fourth quarter GDP accelerated to a moderately healthy 3.2 percent

annualized gain, following a 2.6 percent increase the prior quarter. But the detail

was stronger than the headline number. The last quarter of 2010 was led by sharp

improvement in net exports to a gap of $392.2 billion from $505.0 billion in the

third quarter. Notably, personal consumption expenditures were up an annualized

4.4 percent, coming in much stronger than the third quarter rise of 2.4 percent.

Weakness was led by a sharp slowing in inventory investment to $7.2 billion from

$121.4 billion in the third quarter. Economy-wide inflation as measured by the

GDP price index softened to 0.3 percent in the fourth quarter, following a 2.1 percent

increase the prior quarter. But the price weakness is due to technical peculiarities in

how exports and imports interact in the GDP price index with imports being a

subtraction. The preferred headline measure according to the Commerce Department

is the price index for gross domestic purchases-which excludes exports and imports.

The price index for gross domestic purchases firmed significantly to 2.1 percent from

0.7 percent in the third quarter.

[Chart]

[Chart]

Data Source: Haver Analytics

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