Economy in U.S. Grew at 5.7% Pace, Most in Six Years

The 5.7 percent increase in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance since the third quarter of 2003, figures from the Commerce Department showed today in Washington. Efforts to rebuild depleted inventories contributed 3.4 percentage points to GDP, the most in two decades.

This makes for a great headline number, especially just days after Obama’s ‘jobs jobs jobs’ SOTU, but reading between the lines this number isn’t as great as it seems. An estimated 3.5-4.0% of this growth is due to businesses restocking shelves after being in freeze mode throughout 2009. This is very typical behavior following recessions. Residential and commercial investment is still low, and until that picks up steam expect unemployment to stay above 10%. There are just too much housing inventory available to make a dent in the current high unemployment rate. Most economists expect 2% growth for the rest of the year, which is historically very low coming off a recession.