January 27th 2012 CNBC Stock Market Squawk Box (Q4 GDP)

1/27/2012 - CNBC Stock Market Squawk Box (Q4 GDP).

The economy actually did post a moderate acceleration in the fourth quarter but the recovery is still sub-par. GDP growth rose to 2.8 percent from 1.8 percent in the third quarter. The advance estimate came in lower than market expectations for a 3.1 percent boost.

However, the component mix was not favorable. Inventory growth accelerated moderately and added 1.94 percentage points to overall growth.

Demand numbers decelerated as final sales of domestic product increased an annualized 0.8 percent in the fourth quarter after a 3.2 percent rise in the third. Final sales to domestic purchasers (excludes net exports) advanced 0.9 percent, following a 2.7 percent gain in the second quarter.

Strength in the fourth quarter as mentioned above was largely in inventory investment. Also, PCE spending accelerated to 2.0 percent from 1.7 percent in the third quarter and residential investment improved to 10.9 percent from 1.3 percent. Partially offsetting, government spending fell 4.6 percent after a 0.1 percent dip, nonresidential fixed investment slowed to 1.7 percent from 15.7 percent, and net export worsened slightly.

Economy-wide inflation according to the GDP price index eased sharply to 0.4 percent annualized from 2.6 percent in the third quarter. Analysts had called for a 1.5 percent rise.

The economy overall improved in the fourth quarter but the mix was not as favorable as hoped. The modest improvement in consumer spending is encouraging but more is needed. The Fed appears to have been correct that low rates are needed for some time to boost investment and spending.

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