The 'double dip' scenario touted by many market bears is becoming increasingly untenable, for 2010 at least. We’re coming out of a decade that has seen the lowest contribution of corporate investment to GDP growth since the 1930’s, which has informed my view in recent months that business investment by cash rich US companies rather than consumers which will help fuel a robust US recovery in 2010 to about 4% real GDP growth. That cyclical rebound will be supported by strong net exports and another $450bn in stimulus spending. The just released Q4 data supports that bullish view on the strength of a US cyclical rebound. In particular, the inventory cycle is showing clear signs of reversing with inventory liquidation slowing sharply during Q4, as private business shed $33.5bn compared with $139.2bn in the preceding quarter, adding 3.4% to overall output.

Given the unusually deep and rapid inventory cuts during H1 2009 as a function of the 'one click' nature of the global supply chain in the Internet age, the upside as production simply catches up to sales will be proportionately larger in this recovery than in previous recessions. Consumer spending, which in the boom years accounted for about 70% of economic activity, grew by just 2% and was weaker than in Q3. GDP was also boosted by a rise in non-residential fixed investment, which grew by 2.9% after falling by almost 6% in Q3, and I'm expecting this recovery to be boosted by a surge in business investment. One of the most remarkable things about this data is that government spending rose just 0.1%, so the recovery was driven entirely by the private sector and net exports, which is a very healthy balance.