Defying Expectations, Q4 GDP Holds Its Own

Although far from robust, the preliminary government report on the nation's overall level of economic activity during the final quarter of last year did show scant growth.

In contrast to the steep 1.3% decline in the nation's Gross Domestic Product (GDP) recorded in the third quarter of 2001, GDP was estimated to have expanded at a marginal 0.2% annual rate during the final three months of the year. Thus, the recession that officially began during March 2001 may be nearing an end sooner than most had dared hope following the many economic and political uncertainties after the September 11 terrorist attacks.

However, GDP did contract during the second half of last year, following growth of less than 2% over the 12-month period prior to mid-2001. Economic conditions thus are extremely fragile and the economy remains vulnerable to any extraneous shock of an economic or political nature. For 2001, overall U.S. economic activity grew after inflation adjustment by only 1.1%, following four consecutive years when the nation's GDP expanded by more than 4%. We still may be in for another negative quarter or two before the recession is officially behind us. But barring any extraneous shocks, the U.S. economy should be able to record slightly better growth this year than last—about 1.5% to 2.0%.