GDP: Slight Growth in Q4

January 29, 2016
Bottom Line: Economic growth decelerated in this first estimate of 2015 Q4 GDP. The economy grew slightly less than forecast as a drop in inventory investment, net exports and business fixed investment outweighed the modest increase in consumer spending. The economy has been growing for the past 26 quarters at an average annualized growth rate of 2.1%, suggesting economic growth remains modest with real final sales growing at a 1.9% annualized rate over the last 4 quarters. Final domestic demand is growing at a 2.0% annualized rate over the last 26 quarters. Gross Domestic Product ROSE by 0.7% in Q4, less than market expectations for an increase of 0.8%. This was the 7th straight quarter of increasing economic activity. During the 6.5 years of economic expansion, the economy grew at an average annual rate of 2.2% after declining at a 2.9% rate during the recession. Economic activity is now 1.8% ABOVE its year ago level and 9.6% ABOVE its pre-recession 2007 Q4 cyclical peak. Inventory Investment FELL by $16.9 billion, subtracting 0.45 percentage points from overall economic activity. Consequently, Real Final Sales ROSE by 1.1% and is now 1.9% ABOVE its year ago level. Additionally, Imports ROSE by 1.1% and Exports FELL by 2.5% so Net Exports FELL by $20.4 billion. This implies that Real Final Domestic Demand ROSE by 1.6% and is now 2.5% ABOVE its year ago level. Consumer Spending ROSE by 2.2%, contributing 1.46 percentage points to economic growth. Business Investment FELL by 1.8%, subtracting 0.24 percentage points to GDP. Intellectual property products increased by 1.6% while non-residential structures declined by 5.2%. Residential Investment ROSE by 8.2%, adding 0.27 percentage points to economic growth. Finally, Government Purchases ROSE by 0.7%, adding 0.12 percentage points to GDP. This was the 3rd consecutive positive contribution. The GDP Price Index ROSE by 0.8%, in line with market expectations. This is also 1.1% ABOVE its year ago level.
Article by contingentmacro