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Economy in Brief

U.S. GDP Growth Revised Higher; Inventories Raised and Demand Weakened
by Tom Moeller  February 26, 2016

Economic growth slowed less than previously estimated last quarter. Gross domestic product grew at a 1.0% annual rate (1.9% y/y), up from the advance estimate of a 0.7% gain. Nevertheless, growth was half that in Q3 and down sharply from 3.9% in Q2. The Action Economics Forecast Survey called for 0.4% growth. The chain-type price index was revised up to a 0.9% gain from 0.8%. Expectations were for 0.8%.

The rate of business inventory decumulation subtracted 0.1 percentage points from GDP growth instead of 0.4 points estimated originally. Also subtracting slightly less was deterioration in the foreign trade deficit. The revision to -0.3 percentage points from -0.5 points reflected a slight decline in imports (+2.9% y/y) rather than a moderate rise. Exports fell 2.7% (-0.8% y/y), revised from -2.5%.

Growth in domestic final demand was lessened to 1.4% (2.4% y/y) from 1.6%, and it compared to a 2.9% gain in Q3 and a 3.7% advance in Q2. Slower growth in consumer spending of 2.0% (2.6% y/y) reflected a 6.5% decline (+0.5% y/y) in motor vehicle & parts purchases. That followed a 3.0% increase. Clothing buying fell slightly (+1.6% y/y) after a 1.3% rise, and gasoline & fuel oil spending dropped 2.7% (+1.9% y/y) after 5.2% growth. To the upside, purchases of recreational goods & vehicles strengthened 13.3% (9.6% y/y) after 10.2% growth in Q3, and home furnishings purchases grew 4.9% (5.8% y/y) following an 8.7% jump.

Business fixed investment was little-revised and declined 1.9% (+1.6% y/y), after a 2.6% increase. Structures spending declined 6.6% (-3.9% y/y), off for the third quarter in the last four. Equipment spending fell 1.8% (+2.6% y/y), led by a 30.3% drop (-4.1% y/y) in computers & peripherals. Investment in intellectual property products improved 1.3% (4.0% y/y). Residential investment was little-revised at 7.9% growth (8.9% y/y) following an 8.2% rise.

A lowered figure for government spending also contributed to the lessened estimate of overall demand growth. Overall government investment eased 0.1% (+2.6% y/y), revised from +0.7%. State & local government spending fell 1.4% (+1.2% y/y), but federal government purchases improved 2.2% (0.9% y/y). National defense spending grew 2.7% (0.6% y/y).

The chain type price index was little-revised at 0.9% growth (1.1% y/y) after a 1.3% Q3 rise. The PCE price index was held to 0.4% (0.5% y/y) as gasoline pries fell 26.4% (22.1% y/y). The price index excluding food & energy rose 1.3% (1.4% y/y), about the same as it did in Q3. Durable goods prices eased 1.3% (-1.6% y/y) as furniture & appliance prices declined 2.8% (-2.2% y/y). Clothing prices fell 2.8% (-1.0% y/y). Services costs increased 1.9% (1.9% y/y) as the price index for hotels & restaurants jumped 3.8% (2.5% y/y).

The GDP figures can be found in Haver's USECON and USNA database. USNA contains virtually all of the Bureau of Economic Analysis' detail in the national accounts, including the integrated economic accounts and the recently added GDP data for U.S. Territories. The Action Economics consensus estimates can be found in AS1REPNA.

Chained 2009 $ (%, AR) Q4'15 (2nd Estimate) Q4'15 (Advance Estimate) Q3'15 Q2'15 Q4 Y/Y 2015 2014 2013
Gross Domestic Product 1.0 0.7 2.0 3.9 1.9 2.4 2.4 1.5
  Inventory Effect -0.1 -0.4 -0.7 0.0 0.0 0.2 0.0 0.1
Final Sales 1.1 1.1 2.7 3.9 1.9 2.2 2.4 1.4
  Foreign Trade Effect -0.3 -0.5 -0.3 0.2 -0.5 -0.6 -0.1 0.2
Domestic Final Sales 1.4 1.6 2.9 3.7 2.4 2.8 2.8 1.2
Demand Components
Personal Consumption Expenditures 2.0 2.2 3.0 3.6 2.6 3.1 2.7 1.7
Business Fixed Investment -1.9 -1.8 2.6 4.1 1.6 2.9 6.2 3.0
Residential Investment 7.9 8.2 8.2 9.4 8.9 8.7 1.8 9.5
Government Spending -0.1 0.7 1.8 2.6 1.1 0.8 -0.6 -2.9
Chain-Type Price Index
GDP      0.9 0.8 1.3 2.1 1.1 1.0 1.6 1.6
Personal Consumption Expenditures 0.4 0.1 1.3 2.2 0.5 0.3 1.4 1.4
 Less Food/Energy 1.3 1.2 1.4 1.9 1.4 1.3 1.5 1.5
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