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Economy in Brief

U.S. GDP Growth Slows
by Tom Moeller  January 27, 2017

Economic growth decelerated during Q4'16 to 1.9% from a 3.5% gain in Q3. For all of last year, growth also decelerated to 1.6% from 2.6% in 2015. The Q4 figure fell short of expectations for a 2.1% rise in the Action Economics Forecast Survey.

Deterioration in the foreign trade deficit subtracted 1.7 percentage points from growth as exports fell 4.3% (+1.5% y/y). and imports increased 8.2% (2.5% y/y). The subtraction followed three consecutive quarters of addition. Most of last quarter's subtraction from foreign trade was offset by a 1.0 percentage point addition from faster inventory accumulation.

Growth in domestic final demand quickened to 2.5% (2.1% y/y). It was the swiftest growth since Q3'15, and led by a 10.2% jump in residential investment.

Personal consumption expenditures improved 2.5% (2.8% y/y), the weakest gain in three quarters. Spending on services decelerated to 1.3% (2.2% y/y), the weakest rise since Q3'13. Housing & utilities buying fell 2.0% (+1.4% y/y), but spending on recreation services rose 3.8% (0.4% y/y). Spending on durable goods rose a steady 10.9% (7.8% y/y). Recreational goods & vehicles purchases increased 16.2% (11.7% y/y) while motor vehicle & parts buying grew 11.7% (7.5% y/y). Furniture purchases rose 4.0% (6.0% y/y). In the nondurable goods sector, spending rebounded 2.3% (2.4% y/y) after a 0.5% slip. A 5.9% increase (4.7% y/y) in food store sales was offset by a 0.3% decline (+0.7% y/y) in apparel sales, as well as a 9.3% drop (-1.7% y/y) in gasoline & oil purchases.

Business fixed investment grew 2.4%. Structures spending declined 4.9% (+1.1% y/y), but equipment investment increased 3.1% (-3.6% y/y) following four straight quarters of decline. Industrial equipment investment strengthened 8.3% (2.6% y/y). Intellectual property products investment rose 6.4% (5.6% y/y), and information processing equipment investment increased a lessened 1.5% (0.5% y/y).

Government spending increased 1.2% (0.5% y/y). The gain was held back by a 1.2% decline (-0.2% y/y) in federal government purchases, reduced by a 3.6% shortfall (-2.0% y/y) in defense spending. State & local government purchases increased 2.6% (0.8% y/y) after two quarters of decline.

On the inflation front, the GDP chain price index increased 2.1%. The PCE price index rose 2.2%, but less food & energy the gain was a lesser 1.3%, its weakest rise in four quarters. The business fixed investment price index rose 1.0% (0.6% y/y) while the residential price index gained 3.2% (4.0% 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) Q4'16 (Advance Estimate) Q3'16 Q2'16 Q4'16 Y/Y 2016 2015 2014
Gross Domestic Product 1.9 3.5 1.4 1.9 1.6 2.6 2.4
  Inventory Effect 1.0 0.5 -1.2 0.0 -0.4 0.2 0.0
Final Sales 0.9 3.0 2.6 1.9 2.0 2.4 2.5
  Foreign Trade Effect -1.7 0.9 0.2 -0.2 -0.1 -0.7 -0.1
Domestic Final Sales 2.5 2.1 2.4 2.1 2.1 3.1 2.6
Demand Components
  Personal Consumption Expenditures 2.5 3.0 4.3 2.8 2.7 3.2 2.9
  Business Fixed Investment 2.4 1.4 1.0 0.3 -0.4 2.1 6.0
  Residential Investment  10.2 -4.1 -7.8 1.2 4.9 11.7 3.5
  Government Spending 1.2 0.8 -1.7 0.5 0.9 1.8 -0.9
Chain-Type Price Index
GDP      2.1  1.4 2.3 1.6 1.3 1.1 1.8
  Personal Consumption Expenditures 2.2 1.5 2.0 1.5 1.1 0.3 1.5
    Less Food/Energy 1.3 1.7 1.8 1.7 1.7 1.4 1.6
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