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4Q20 GDP: Slight Revisions

February 25, 2021
Bottom Line:  The second estimate of 4th Quarter 2020 GDP was revised modestly higher, a bit less than expected as personal consumption was a touch lower, but the residential investment was higher.  Core PCE, the Fed's preferred inflation metric, was 1.4%, well below their target. Overall, these revisions were minor and confirmed that while consumption continued to grow in the 4th Quarter, the pace of gains slowed sharply.  The recovery was driven by housing and manufacturing.  Most data suggest these trends continued into the 1st Quarter of 2021.  The median of Bloomberg consensus estimates for the 1st Quarter was 3.5% quarter-over-quarter annualized this morning.
GDP was REVISED UP by 0.1 points to 4.1% in this second estimate of economic activity for Q4-20.  This was lower than market expectations for an upward revision to 4.2%.
Economic activity is now 2.4% BELOW its year ago level and 25.3% ABOVE its 2007 Q4 cyclical peak.  Because most of the adjustment was due to new December data, this revision suggests that the economic activity increased slightly at the end of the quarter.
Consumer Spending
was revised lower by -0.14% to 2.4%, contributing 1.61% to economic growth. Business Fixed Investment was revised higher by 0.23% to 14.0%, contributing 1.76% to economic growth. Residential Investment was revised higher by 2.25% to 35.8%, contributing 1.37% to economic growth. Inventory Investment was revised slightly higher, contributing 1.11% to economic growth.
Net Exports
were revised modestly lower with a slight decline in Exports and slight growth in Imports, contributing -1.55% to economic growth.
Government Purchases were revised slightly higher and fell modestly for the 3th time in the past 12 quarters, contributing -0.19% to economic growth.
 As a result of all of these changes, Real Final Sales was revised slightly higher while Real Domestic Demand was unchanged.
The GDP Price Index was REVISED UP by 0.10 points to 2.2%, compared with market expectations of 2.2%. Economy-wide prices are now 1.3% ABOVE its year-ago level.