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Economy in Brief

U.S. GDP Growth is Revised Higher; Corporate Profit Growth Improves Q/Q
by Tom Moeller  March 27, 2014

Real GDP growth for Q4'13 was revised slightly higher to 2.6% (2.6% y/y) from 2.4% estimated last month. The Department of Commerce, in this third estimate, indicated that growth remained down sharply from 4.1% in the third quarter. It roughly matched consensus expectations for a 2.7% rise in the Action Economics Forecast Survey.

Corporate profits with IVA and CCA grew at a 9.2% annual rate (6.2% y/y) following a 7.7% Q3 rise. For all of last year, profits were up 4.6% following a 7.0% increase during 2012. After tax earnings without IVA and CCA rose at a 7.9% rate (6.0% y/y) last quarter. It was, however, the weakest gain since a decline in Q1'13. For all of last year, earnings rose 5.1%, down from the 19.2% rise in 2012. Financial sector profits grew 8.3% y/y while profits earned overseas increased 5.9% y/y. Earnings in the domestic nonfinancial industry rose 5.5% y/y.

Domestic final sales rose at an improved 1.6% rate (1.6% y/y) last quarter. Growth in personal consumption expenditures was raised to 3.3% (2.3% y/y), its quickest rise in three years. Growth in spending on services was revised sharply higher to 3.5% (1.7% y/y) as growth in financial services (4.3% y/y) and health care (3.3% y/y) was strong. Spending growth on durable goods was increased to 2.8% (5.6% y/y) but motor vehicle purchases slipped 0.1% (+2.2% y/y). Spending on home furnishings & appliances rose at a 2.0% rate (7.0% y/y), the weakest gain since Q2 2012. Nondurable spending was revised lower to 2.9% (2.5% y/y) but still was led by a 4.5% rebound (1.9% y/y) in purchases of apparel. Revised lower was growth in business fixed investment to 5.7% (2.6% y/y). Transportation equipment spending led last quarter's rise with a 28.4% gain (6.8% y/y) while intellectual property products grew 4.0% (3.0% y/y). Residential investment showed an easier 7.9% decline (+6.9% y/y). The decline in government spending was little-changed at 5.2% (-2.4% y/y). The fall subtracted roughly a full percentage point from Q4 GDP growth. Defense spending fell at a 14.5% rate (-6.9% y/y) while state & local government spending was unchanged (0.2% y/y).

The effects from inventory investment and foreign trade were little-changed.  A lessened foreign trade deficit added one percentage point to Q4 growth. The improvement owed last quarter to a 9.5% rise (4.9% y/y) in exports versus a 1.5% gain (2.8% y/y) in imports. The effect from inventory accumulation had little effect on Q4 GDP growth following the 1.7 point addition in Q3.

The chain-type GDP price index rose at an expected 1.6% rate (1.4% y/y), unchanged from the last estimate. The personal consumption price index rose at a 1.1% rate (1.0% y/y) while the business fixed investment price index increase held q/q at 1.2% (1.2% y/y). The residential investment price index surged at a 7.6% rate (6.1% y/y), the fastest y/y growth since late 2005.

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

Chained 2009 $, %, AR Q4'13 (3rd Estimate) Q4'13  (2nd Estimate) Q4'13 (Advance) Q3'13 Q2'13 Q4 Y/Y 2013 2012 2011
Gross Domestic Product 2.6 2.4 3.2 4.1 2.5 2.6 1.9 2.8 1.8
  Inventory Effect -0.0 0.1 0.4 1.7 0.4 0.2 0.2 0.2 -0.2
Final Sales 2.7 2.3 2.8 2.5 2.1 1.8 1.7 2.6 2.0
  Foreign Trade Effect 1.0 1.0 1.3 0.1 -0.1 0.2 0.2 0.2 0.2
Domestic Final Sales 1.6 1.2 1.4 2.3 2.1 1.6 1.5 2.4 1.8
Demand Components
Personal Consumption 3.3 2.6 3.3 2.0 1.8 2.3 2.0 2.2 2.5
Business Fixed Investment 5.7 7.3 3.8 4.8 4.7 2.6 2.7 7.3 7.6
Residential Investment -7.9 -8.8 -9.8 10.3 14.2 6.9 12.2 12.9 0.5
Government Spending -5.2 -5.5 -4.9 0.4 -0.4 -2.4 -2.3 -1.0 -3.2
Chain-Type Price Index
GDP      1.6 1.6 1.3 2.0 0.6 1.4 1.4 1.7 2.0
Personal Consumption 1.1 1.0 0.7 1.9 -0.1 1.0 1.1 1.8 2.4
 Less Food/Energy 1.3 1.3 1.1 1.4 0.6 1.2 1.2 1.8 1.4
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