Updated 2 p.m. EST – It wasn’t much of an increase, but the economy did expand in the final quarter of 2001. This morning the U.S. Commerce Department released figures indicating the Gross Domestic Product grew 0.2% during the last three months of the year.

News of the increase surprised many economists, who predicted a 1% drop for the period, following a 1.3% contraction in the third quarter of the year. However, Heavy Duty Trucking's freight and truck sales forecasts assumed a 0.4% fourth-quarter GDP rise.
For all of 2001 the GDP increased 1.1%, the weakest showing since a 0.5% increase in 1991.
Newport Communications Senior Economist Jim Haughey says the gain in the fourth quarter should end any doubts that the economy is recovering from both the long manufacturing recession and the shock of the Sept. 11 attacks.
“The GDP results confirm HDT's outlook that both freight volume and truck sales will be rising modestly in the current quarter,” Haughey says.
The real question, he says, is whether the economy can keep expanding “The growth drivers in the last quarter are largely exhausted -- the tax rebates are spent, the zero percent car loan offers are largely over, and the big and immediate post-Sept. 11 costs are now behind us.”
Haughey predicts GDP growth in the current quarter will depend on several factors: an improvement in exports as the rest of the world also recovers from recession, a huge drop in inventory destocking as the surplus is now largely gone, and less of a decline, but not a gain, in business investment spending. He says the net result is likely to be GDP growth of about 1%.
News of the GDP was released on the same day the Federal Reserve is expected to wrap up a two-day policy meeting in which it is expected they will announce they will leave interest rates unchanged.
Most of the increase in the GDP was due to a rush of consumer spending for the holidays and big increases in government spending. Consumer spending increased 5.4%. Spending on durable goods skyrocketed 38.4%, mostly in the form of motor vehicles, the biggest jump in more than 15 years.
However, business spending on new plants and equipment plunged 12.8% in the fourth quarter, compared to an 8.5% drop in the third quarter. Such spending fell in all four quarters of 2001.
Government spending grew 9.2% in the fourth quarter, also the biggest rise in 15 years, and was due mainly to increasing in spending for health, education and security. It offset a $22 billion worsening of foreign trade, mostly due to lower capital goods exports, and a reduction in foreign tourists in the U.S., plus a $106 billion plunge in business investment in the form of inventory and non-residential buildings.
Some economists predict the United States won't truly pull out of recession until business spending and investment picks up.