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The Good News Behind GDP's Decline

On Friday, it was announced that U.S. gross domestic product rose an annualized 2.6 percent in the fourth quarter -- a marked slowdown from the 5 percent growth we witnessed in the third quarter of 2014. But what the market took to be bad news was actually a sign of economic strength.

Falling net exports subtracted a full percentage point from GDP growth. But net exports -- exports minus imports -- only looked relatively weak because consumer demand for imports was so strong, growing at an annualized rate of 8.9 percent quarter over quarter. In fact, this past December, U.S. companies imported $48.8 billion worth of consumer goods, an all-time record figure.

In the fourth quarter, household consumption was the main driver of GDP growth, up by over 4 percent. This is a positive sign for the U.S. economy, particularly when considering that nearly 70 percent of economic activity in… Read More …