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Economy in Brief

4Q U.S. GDP Light at 4.0%
by Tom Moeller January 30, 2004

US economic growth last quarter of 4.0% (AR) was somewhat below Consensus expectations for 4.8%. The gain was half the 8.2% of 3Q but it raised growth for the full year to 3.1%, the fastest since 2000.

Much of the disappointment in 4Q growth stemmed from the foreign trade sector which added just 0.2 percentage points. Higher exports contributed 1.7 percentage points to GDP growth with a 19.1% (AR) q/q rise, but imports also surged by 11.3%.

Domestic final demand growth dropped to 3.1% from 7.2% in 3Q. Growth in real PCE slowed to 2.6% from 6.9% as spending on motor vehicles fell. Spending in other areas remained firm.

Nonresidential fixed investment surged another 9.0% (6.9% y/y) following two strong quarterly gains. Investment in equipment & software surged at an 11.5% rate following a 19.1% 3Q boom.

Residential investment surged at a 17.4% rate (15.0% y/y) after a 25.5% 3Q jump.

Inflation was tame at 1.1%. The PCE chain price index rose just 0.6% (AR, 1.4% y/y) as prices for consumer durables fell yet again (-4.0% y/y).

Analysis titled "Mind the Gap: Measuring Actual vs. Potential Output" from the Federal Reserve Bank of St. Louis is available here.

Chained 2000$, % AR 4Q '03 3Q'03 Y/Y 2003 2002 2001
GDP 4.0% 8.2%  4.3% 3.1% 2.2% 0.5%
  Inventory Effect 0.6% -0.1% -0.1% -0.1% 0.4% -0.9%
Final Sales 3.4% 8.3% 4.4% 3.2% 1.8% 1.4%
  Trade Effect 0.2% 0.8% 0.3% -0.1% -0.6% -0.2%
Domestic Final Demand 3.1% 7.2% 4.1% 3.3% 2.4% 1.6%
Chained GDP Price Index 1.1% 1.6% 1.5% 1.6% 1.5% 2.4%
Chicago Purchasing Agents' Index Highest Since 1994
by Tom Moeller January 30, 2004

The Chicago Purchasing Managers Business Barometer for January surged to 65.9 versus 61.2 in December. That was the highest level since July 1994 and was versus Consensus expectations for a modest rise to 62.0. Revisions were made to prior figures due to new seasonal factors.

During the last twenty years there has been a 52% correlation between the level of the Chicago PMI and quarterly growth in real GDP.

The new orders index jumped to 69.7, the highest level since July 1994. Production also jumped to 76.5 the highest level since January 1984.

Employment dipped below 50 for the third consecutive month to 48.3.

The index of prices paid jumped to 67.8 and recovered virtually all of the prior month's slide.

Chicago Purchasing Managers Index, SA Jan Dec Y/Y (1'02) 2003 2002 2001
Business Barometer 65.9 61.2 54.9 54.7 52.7 41.4
  New Orders 69.7 66.1 57.1 58.0 56.2 42.3
Prices Paid 67.8 57.3 56.1 55.8 56.9 50.4
U.S. Consumer Sentiment Firmed Through January
by Tom Moeller January 30, 2004

The University of Michigan’s consumer sentiment index for the full month of January rose to 103.8, up 12.1% m/m. That was better than the 11.4% spike in sentiment reported mid-month and was better than Consensus expectations for a reading of 103.0.

During the last ten years there has been an 75% correlation between the level of consumer sentiment and the y/y change in real PCE. That correlation has risen to 84% during the last five years.

The current conditions index jumped 12.9% m/m to 109.5 and the expectations index added 11.5% m/m to 100.1. Both readings were improved versus mid-month.

The University of Michigan survey is not seasonally adjusted.It is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

University of Michigan Jan Dec Y/Y 2003 2002 2001
Consumer Sentiment 103.8 92.6 26.0% 87.6 89.6 89.2
   Current Conditions 109.5 97.0 12.7% 97.2 97.5 100.1
   Consumer Expectations 100.1 89.8 37.5% 81.4 84.6 82.3
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