GDP Gap Stuck at 6%

Pro Growth Liberal points us to this interpretation of new economic data:

GDP Gap Stuck at 6%

Dean Baker gets it right with respect to the latest news on GDP:

A sharp drop in government spending, heavily concentrated in defense, coupled with a decline in inventories caused GDP to shrink at a 0.1 percent rate in the 4th quarter. Government spending fell at a 6.6 percent annual rate, driven by a 22.2 percent decline in defense spending, subtracting 1.33 percentage points from the growth rate in the quarter. A 40.3 drop in the rate of inventory accumulation reduced growth by another 1.27 percentage points. Without these factors, GDP would have grown at a 2.5 percent annual rate in the quarter. Pulling out these extraordinary factors, the GDP data were largely in line with prior quarters.

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