The nation’s gross domestic product grew at a much faster than expected rate in the fourth quarter as wages increased and inflationary pressures decreased. Will the media care, or figure out a way to tie consumer enthusiasm to the Democrats taking back Congress?
Before you place your bets, let’s look at the facts as reported by Bloomberg (emphasis mine throughout):
The U.S. economy grew at a faster- than-forecast annual pace of 3.5 percent last quarter, propelled by a rebound in consumer spending as gasoline prices fell and wages grew.
The growth rate was the strongest since the first three months of 2006 and followed a 2 percent third-quarter pace, the Commerce Department reported today in Washington. A measure of inflation watched by the Federal Reserve rose at a slower pace.
Hmmm. Strong growth. Lower inflation. Strong wages. Doesn’t sound like what the media have been reporting, does it? Well, the details are even better:
For all of 2006, the economy expanded 3.4 percent after growing 3.2 percent the previous year.
Wages and benefits paid to American workers rose less than forecast last quarter, suggesting inflationary pressures in the labor market are contained, a separate report from the Labor Department showed. The employment cost index rose 0.8 percent, following a 1 percent third-quarter gain.
The GDP report's price index rose at an annual rate of 1.5 percent, the smallest gain in more than three years, compared with 1.9 percent in the third quarter. A measure of prices tied to consumer spending dropped at a 0.8 percent annual rate, the first decline since 1961.
Consumer spending, which accounts for about 70 percent of the economy, rose at an annual rate of 4.4 percent last quarter, compared with a 2.8 percent pace in the previous three months.
Rising wages are taking the sting out of a housing slowdown that has caused home prices to stagnate. Homeowners had tapped increasing home values to boost spending during the five-year housing boom that peaked in 2005, economists said.
A smaller trade gap also gave the economy a boost. The trade deficit shrank to an annual $581.4 billion pace from $628.8 billion in the third quarter. The deficit added 1.6 percentage points to GDP, the most in 10 years.
Hmmm. Strong growth, easing inflation, rising wages, and the best trade numbers in 10 years. Sound like the depression that the media seem to believe exists?
In reality, this is a Goldilocks report, and exactly what most economists pray for. Sadly, it seems unlikely that most Americans are going to hear about it without some political spin attached.