January 28, 2011

GDP growth a good number, but also a warning

The GDP growth of 3.2% is “a good number”, according to economist Bruce Yandle, but cautions that other numbers in the report signal the possibility of real inflation.

“This 3.2% number is hitting right on the common estimate for this year’s GDP,” said Yandle.  “This is a 4th quarter number with enough strength to give credibility to the forecasts that were revised upward after President Obama and Congress passed the deal to keep the tax cuts in place.”

“Retail sales have been lagging substantially in this downturn because of the upward spike in savings.  But now people appear to be more confident and are opening their purse strings,” said Yandle.

Despite the good signs this number brings, Yandle sees the large jump in the price index for personal consumption to be a hurricane flag of sorts for what we might see in 2011. 

“This is a serious warning about the prospect of meaningful inflation relative to where we’ve been,” said Yandle.