U.S. GDP Growth Is Revised Upward in Q4; Corporate Profits Strengthen

Real GDP growth in Q4’23 was revised to 3.4% (SAAR) from 3.2% reported last month and 3.3% reported initially. it followed a 4.9% Q3 increase. A 3.1% rise had been expected in the Action Economics Forecast Survey. Real GDP grew an unrevised 3.1% on a Q4/Q4 basis, after a 0.7% rise in 2022 and 5.4% growth in 2021. Growth averaged 2.5% last year versus 1.9% in 2022.

Corporate profits after-tax w/o IVA & CCA rose 2.6% (8.6% y/y) last quarter following a 4.0% Q3 increase. Before-tax earnings with IVA & CCA increased 4.1% (5.1% y/y) after a 3.4% rise. Financial sector earnings grew 1.3% (-4.6% y/y) while nonfinancial sector profits rose 5.9% (7.7% y/y). Rest of world earnings declined 1.7% (+2.8% y/y).

Contributions to growth from international trade & the change in inventories were revised. Inventories subtracted 0.47 percentage points from growth last quarter, revised from a 0.27 percentage point subtraction. Net exports added 0.25 percentage points, revised from a 0.32 percentage point contribution reported last month. It followed two straight quarters of minimal add. Exports grew a downwardly revised 5.0% (1.8% y/y) which followed a 5.4% Q3 rise. Imports grew a lessened 2.2% (-0.1% y/y) after rising 4.2% in Q3.

Growth in real final sales to domestic purchasers was increased to 3.5% (3.2% y/y) from 3.1% after rising 3.5% in Q3. Personal consumption expenditures rose a modestly raised 3.3% (2.7% y/y) after a 3.1% increase, adding 2.2 percentage points to Q4 growth. Durable goods spending growth was unrevised at 3.2% (5.8% y/y), following a 6.7% gain. Motor vehicle expenditures fell a lessened 1.7% (+4.0% y/y), slightly more than it did Q3. Furniture & appliance buying rose 1.7% (2.2% y/y), revised from 2.5%, after a 5.5% gain in Q3 while recreational goods & vehicle purchases grew a marginally changed 7.5% (11.2% y/y) after strengthening 16.9% in Q3.

Nondurable goods outlays improved a downwardly revised 2.9% (2.0% y/y), following 3.9% growth in Q3. Apparel outlays rose a lessened 3.4% (0.8% y/y) after a 6.2% increase while food & beverage spending rose a lessened 0.8% (0.1% y/y) following a 1.9% gain. Outlays on gasoline & other energy products rose an unchanged 4.3% (3.8% y/y) after falling 1.0% in Q3.

Spending on services increased 3.4% (2.4% y/y), revised from 2.8%, last quarter following a 2.2% gain in Q3. Health care purchases rose 7.8% (5.7% y/y), revised from 1.5%, following a 2.7% increase. Transportation services outlays growth of 4.2% (1.8% y/y) was increased from 2.8% following a 0.9% rise. Restaurant & hotel accommodations rose a lessened 6.5% (3.8% y/y) after gaining 7.1% in Q3, while growth in recreation outlays improved 0.4% (2.9% y/y), revised from 4.1%, after a 2.3% rise in Q3. Housing & utilities outlays rose a lessened 0.1% (0.6% y/y), after a 3.0% Q3 improvement.

Business fixed investment increased 3.8% (4.6% y/y), revised from 2.4% last quarter, following a 1.5% Q3 rise as spending on nonresidential structures increased 10.9% (16.9% y/y), revised from 7.6%, after rising 11.2% in Q3. Equipment investment fell 1.1% (-0.6% y/y), revised from -1.7%, after falling 4.4%. Information processing investment surged 11.4% (-0.9% y/y), revised from 9.4% following four consecutive quarterly declines, while industrial equipment outlays held steady (-1.7% y/y), about as estimated last month, after falling 5.4%. Transportation equipment spending weakened a marginally changed 21.6% (+2.8% y/y) after a 1.7% drop in Q3. Investment in intellectual property products rose 4.3% (3.1% y/y), revised from 3.3%) after a 1.8% rise.

Residential structures investment increased a minimally-changed 2.8% (0.4% y/y) after a 6.7% increase.

Government spending increased 4.6% both q/q and y/y, revised from 2.2%, accounting for 0.79 percentage points of GDP growth, after a 5.8% rise. Federal government spending growth of 2.4% (3.9% y/y) was minimally revised and followed a 7.1% jump. State & local government spending grew 6.0% (5.1% y/y), revised from 5.4%, following a 5.0% Q3 rise.

The GDP price index rose an unrevised and expected 1.6% (2.6% y/y) after a 3.3% Q3 gain. The PCE price index increased an unchanged 1.8% (2.8% y/y) after a 2.6% rise. The PCE price index excluding food and energy prices rose a minimally changed 2.0% (3.2% y/y), as it did in Q3. The PCE goods price index fell 1.4% (+0.1% y/y) after rising 0.9% as gasoline prices fell and services prices rose 3.4% (4.1% y/y), about the same as they did in Q3. The services price index less energy & housing rose a minimally changed 2.6% (3.6% y/y) after a 2.9% rise.

The business fixed investment price index rose 2.0% (2.3% y/y), revised from 1.8%, following a 0.9% rise. The residential investment price index increased an unchanged 4.0% (1.3% y/y) after a 4.8% gain. The government spending price index rose a minimally changed 1.9% both m/m and y/y after strengthening 5.1% in the third quarter.

The GDP data can be found in Haver’s USECON and USNA databases. USNA contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in AS1REPNA.