Released February 10, 2010
1 By: Jeremy Diamond, Ryan O’Hagan, Robb Calhoun and Mary Rooney | Annaly Capital Management
• The Economy: Beneath the headline GDP number
• The Residential Mortgage Market: Who benefits from the Fed’s buying program? Not homeowners
• The Commercial Mortgage Market: Stuy town’s next chapter
• The Corporate Credit Market: Global policy uncertainties offset corporate earnings
• The Markets: Fear beats greed in January
On January 29th, the Bureau of Economic Analysis released the advance reading for GDP in the fourth quarter of 2009: growth
of 5.7% on an annualized basis, versus 2.2% in the previous quarter and (5.4%) in the year-ago period. The details of the release
were met with mixed reviews. The major contributor to growth, as was widely reported, was the change in private inventories.
The adjustment in inventories added 3.4% of the 5.7% total, or very nearly 60%. Inventories didn’t actually grow, they simply
shrank at a slower pace. Economists, analysts, and investors seem to be split into two camps, and persuasive arguments can be
made for either. “Give me a one-handed economist,” demanded President Harry Truman, in vain:
• On one hand – A slower inventory decline is not the same as a recovery. With all this government
stimulus, shouldn’t we be seeing more robust growth? The mighty fiscal and monetary effort has relatively
little to show for it.
• On the other hand – Inventories always lead the rest of the economy, so this presages more to come. It
doesn’t matter where growth comes from, it’s here.
Both sides have a point. Fortunately, the quarterly release from the BEA comes with other data, including personal income and
spending, to help shed light on the headline GDP growth number. Readers of our blog know that we’ve been watching the labor
market closely, and readers of past commentaries will be familiar with real personal inc