US GDP Report Disappoints, Bodes Poorly For Obama

Published: Jan 27, 2012

By Peter Morici

Preliminary estimates indicate gross domestic product growth was a disappointing 2.8% in the fourth quarter--analysts had expected 3.0%.

A huge jump in inventories accounted for 65% of all growth, indicating perilous overstocking. Consumers are expected to pull back a bit in the first quarter owing to mounting credit card debt.

Over stocking in the fourth quarter plus slower consumer spending, indicate growth will likely be less than 2% in the first quarter of 2012--my forecast is 1.8%.

Additional imports continued to be a big drag on growth--subtracting about three-quarters of a percentage point, and more than additional exports added to growth.

Jobs growth lags GDP and will likely remain near December's encouraging level when the January data come out next Friday. However, look for jobs growth to slow and drag on President Barack Obama's popularity during the critical spring and summer campaigning season.

General elections are generally decided by Labor Day--those polls usually indicate the winner as the ever-longer campaign season hardens voters attitudes about candidates by fall.

The author can be reached at pmorici@rhsmith.umd.edu and followed on Twitter at @pmorici1.