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Economy in Brief

U.S. GDP Growth Is Unrevised
by Tom Moeller  February 27, 2020

The U.S. economy grew 2.1% (SAAR) during the fourth quarter of 2019, unrevised from the advance estimate. The gain roughly matched growth during the prior two quarters and equaled expectations in the Action Economics Forecast Survey.

Growth in domestic final demand was lessened slightly to 1.5% (2.3% y/y) from 1.6%. It remained the slowest rise since Q4'18 and was down from a 4.9% peak in Q4'17.

The increase in personal consumption expenditures was lessened to 1.7% (2.6% y/y), a sharp deceleration from growth during the prior two quarters. Spending growth on durable goods was raised slightly to 2.6% (5.9% y/y) as motor vehicle expenditures grew 5.5% (3.0% y/y), much improved from the 0.8% gain estimated last month. Recreational vehicle purchases grew a lessened 1.7% (12.0% y/y) and growth in furniture & appliance purchases also decelerated to a reduced 1.1% (4.5% y/y). Nondurable goods purchases fell 0.3% (+3.0% y/y), lessened from +0.8%. Growth was held back by declines in spending on food & beverages and "other" products. Apparel purchases increased a reduced 4.8% (3.1% y/y) and gasoline & other energy product purchases fell 0.7% (-0.1% y/y), revised from +4.7%. Consumer spending on services increased a steady 2.2% (2.0% y/y). Outlays on housing & utilities rose a lessened 0.2% (0.9% y/y) and spending growth at restaurants fell to 1.3% (2.0 y/y). Growth also slowed for transportation services to a lessened 0.2% (3.1% y/y), but recreation growth was little changed at 2.7% (2.0% y/y). Health care outlays increased a strengthened 3.8% (3.5% y/y), the best gain in three quarters.

Business fixed investment fell at a 2.3% rate (-0.3% y/y), which was deepened from -1.5% and down for the third consecutive quarter. The weakness was paced by a 8.1% drop (-6.5% y/y) in building outlays, which remained on par with the declines in three of the prior four quarters. The decline in equipment investment was deepened to 4.4% (-1.9% y/y) from -2.9% (-1.5% y/y), down for the third quarter in the last four. A sharp 12.6% decline (-2.2% y/y) in industrial equipment investment was accompanied by an improved 0.8% rise (2.3% y/y) in information processing equipment. Intellectual property product investment rose 4.0%. Growth of 5.7% y/y remained below the peak of 9.6% early in 2019.

Residential investment rose a little-changed 6.1% (1.6% y/y), the second quarter of improvement after falling for the last two years.

Government spending growth rose to 2.6% q/q, close to the prior estimate. It left y/y growth at 3.0%, the strongest rise since 2009. Federal government spending rose 3.8% (4.4% y/y) bolstered by a 5.3% strengthening of defense outlays. During all of 2019, defense spending rose 4.9%, the quickest growth in ten years and improved from declines early in the decade. Nondefense outlays rose 4.1% y/y, the quickest growth since 2012. State & local investment also rose an improved 2.2% y/y, up from 0.6% in 2017.

Holding back economic performance was inventory liquidation which subtracted 1.0 percentage point from GDP growth, revised from 1.1 points. Offsetting this drag was an unrevised 1.5 percentage point addition to growth from a smaller foreign trade deficit. Exports of goods & services rose an improved 2.1% (0.3% y/y) while imports declined 8.6% (-2.2% y/y).

Pricing power remained under control as the GDP price index rose a lessened 1.3% (1.6% y/y). An unchanged 1.4% had been expected. The PCE price index rose a lessened 1.3% (1.4% y/y) and prices excluding food & energy were up 1.2%, revised from 1.3%, leaving y/y growth a reduced 1.6%. The change in the business fixed investment price index was raised to 0.5% (1.2% y/y) from -0.2%. The residential investment price index rose 2.6%, revised from 2.7%, and an unchanged 2.6% 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. Both databases include tables of the newly published not seasonally adjusted data. The Action Economics consensus estimates can be found in AS1REPNA.

U.S. Economic Outlook and Monetary Policy from Fed Vice Chair Richard H. Clarida is available here.

Chained 2012 $ (%, AR)

Q4'19 (Second Estimate)

Q4'19 (Advance Estimate) Q3'19 Q2'19 Q4'19 Y/Y 2019 2018 2017
Gross Domestic Product 2.1 2.1 2.1 2.0 2.3 2.3 2.9 2.4
  Inventory Effect (%-point) -1.0 -1.1 0.0 -0.9 -0.4 0.1 0.1 0.1
Final Sales 3.1 3.2 2.1 3.0 2.7 2.2 2.8 2.3
  Foreign Trade Effect (%-point) 1.5 1.5 -0.1 -0.7 0.4 -0.1 -0.2 -0.2
Domestic Final Sales 1.5 1.6 2.2 3.6 2.3 2.3 3.0 2.5
   
  Personal Consumption Expenditure 1.7 1.8 3.1 4.6 2.6 2.6 3.0 2.6
  Nonresidential Fixed Investment -2.3 -1.5 -2.3 -1.0 -0.3 2.1 6.4 4.4
  Residential Investment 6.1 5.8 4.6 -2.9 1.6 -1.5 -1.5 3.5
  Government Spending 2.6 2.7 1.7 4.8 3.0 2.3 1.7 0.7
Chain-Type Price Index
   GDP 1.3 1.4 1.8 2.4 1.6 1.8 2.4 1.9
    Personal Consumption Expenditure 1.3 1.6 1.5 2.4 1.4 1.4 2.1 1.8
        Less Food & Energy 1.2 1.3 2.1 1.9 1.6 1.6 1.9 1.6
    Nonresidential Investment 0.5 -0.2 0.5 2.0 1.2 1.1 1.4 1.0
    Residential Investment 2.6 2.7 3.4 1.7 2.6 2.9 5.6 4.5
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