U.S. GDP Growth Is Unrevised at 1.9%

Estimates of economic performance last quarter were little changed from the advanced estimates. Growth of 1.9% in Q4'16 gross domestic product equaled the estimate issued last month; it followed a 3.5% gain in Q3. During all of last year, growth 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.

As estimated last month, deterioration in the foreign trade deficit subtracted 1.7 percentage points from growth as exports fell 4.0% (+1.6% y/y) and imports increased 8.5% (2.5% y/y). Exports of goods fell 6.6% (+2.1% y/y), but services exports improved 0.9% (0.6% y/y). Imports of goods increased 10.6% (2.4% y/y) while services imports eased 0.4% (+3.2% y/y). The subtraction from GDP growth due to foreign trade followed three consecutive quarters of addition.

A 1.0 percentage point addition to GDP growth due to strengthened inventory accumulation offset much of the subtraction from foreign trade. It was only the second quarterly addition since the beginning of 2015.

Growth in domestic final demand quickened last quarter to a little-revised 2.6% (2.1% y/y). It was the swiftest growth since Q3'15. A 9.6% jump in residential investment led the increase, though that was less than the 10.2% gain estimated last month.

Personal consumption expenditures improved 3.0% (3.0% y/y), revised up from 2.5%. Spending on durable goods rose a steady 11.5% (7.9% y/y). Recreational goods & vehicles purchases jumped 14.6% (11.4% y/y) while motor vehicle & parts buying grew 16.0% (8.5% y/y). Furniture purchases rose 4.3% (6.1% y/y). In the nondurable goods sector, spending rebounded 2.8% (2.5% y/y) after a 0.5% slip. A 6.6% increase (4.9% y/y) in food store sales was accompanied by little change (+0.8% y/y) in apparel sales. Gasoline & oil purchases declined 5.9% (-0.8% y/y). Growth in spending on services decelerated to 1.8% (2.3% y/y), the weakest rise since Q1'14. Spending on housing & utilities fell 1.1% (+1.6% y/y), but spending on recreation services rose 1.8% (-0.0% y/y).

Business fixed investment grew 1.3%, revised from 2.4%. Structures spending declined a slightly lessened 4.4% (+1.2% y/y), but the gain in equipment investment was lowered to 1.9% (-3.9% y/y) from 3.1%. The rise followed four straight quarters of decline. Industrial equipment investment increased 1.9% (-3.9% y/y), and information processing equipment investment improved 4.2% (1.2% y/y). Investment in intellectual property products rose 4.5% (5.1% y/y).

Government spending increased 0.3% (0.2% 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 a reduced 1.3% (0.5% y/y) after two quarters of decline.

On the inflation front, the GDP chain price index increased a little-changed 2.0%. The PCE price index rose 1.9%, but less food & energy the gain was a lesser 1.2%, the weakest rise in four quarters. The business fixed investment price index rose 0.9% (0.6% y/y) while the residential price index gained a steady 5.1% (4.5% 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.