Stat of the Week: 2.8% Q4 GDP Growth

On Friday, the Commerce Department announced that its preliminary Q4 GDP estimate is 2.8% — the fastest growth rate in 18 months but below economists� estimates of 3%.

When you dig into the details of the GDP report, however, the number looks better, reflecting something like 4% growth in the private economy and -1% for government spending. Inventory growth added 2%, while an additional 2% came from consumer spending, but defense-spending cuts and lower government spending (mostly at the state and local level) subtracted about 1% from the overall GDP figure. The U.S. economy will keep growing this year, but due to the big distortion from inventory growth, gains are unlikely to exceed 3%.

Most of the other economic news last week was positive. The Conference Board announced on Thursday that its index of leading economic indicators (LEI) rose 0.4% in December, as seven of 10 LEI components were positive in December: the interest rate spread, jobless claims, manufacturing hours, stock prices, overall new orders, manufacturers� new orders for nondefense capital goods (excluding aircraft) and manufacturers� new orders for consumer goods and materials. One component remained unchanged (building permits), while two components — consumer expectations and a barometer of credit — declined.

On the bright side, one of those declining indicators, consumer expectations, has already turned sharply up in January. On Friday, the University of Michigan/Reuters consumer sentiment index surged to 75, up sharply from 69.9 in December, and a point above the economists� consensus forecast of 74. Consumer sentiment is now at its highest level in a year, which bodes well for future GDP growth.

Also on Thursday, the Commerce Department announced that December durable-goods orders rose by a stronger-than-expected 3%, for the third straight monthly rise. �Core� orders (nondefense capital goods, excluding aircraft) were up a very healthy 2.9%. For the full year of 2011, core orders rose 10%!

On the jobs front, we learned that new weekly jobless claims rose 21,000, to 377,000, but that increase was expected after the previous week�s sharp decline. More importantly, the four-week moving average of new claims fell by 2,500, to 377,500.

We�ll learn more about jobs in Friday�s January payroll report.