Drop in Imports Boosts GDP in 4th Quarter

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A plunge in imports contributed 2.4 percentage points to the 3.2 percent growth rate in GDP for the fourth quarter of 2010, according to the latest Bureau of Economic Analysis' report on the Gross Domestic Product. With imports falling at a 13.6 percent annual rate in the fourth quarter, the replacement of foreign-produced goods by domestically produced goods was the largest factor propelling growth. Consumption of durable goods, led by a surge in new car purchases, added another 2.26 percentage points to growth for the quarter.

The drop in imports was clearly associated with the slower pace of inventory accumulation. Inventories grew at just a $7.2 billion annual rate, compared to a $121.4 billion rate in the third quarter. Many of the goods that end up in inventories are imported so the two components generally fluctuate together. The slower pace of inventory accumulation subtracted 3.7 percentage points from GDP growth. Final sales of domestic product grew at a 7.3 percent rate in the quarter.

For more info, check out our latest GDP Byte.