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Economy in Brief

U.S. GDP & Prices Rise More Than Expected in Q4:21
by Tom Moeller  January 27, 2022

• Real GDP growth strengthened by inventory building.

• Private domestic final demand growth picks up slightly.

• Price inflation accelerates.

The economy remained on a firm footing in 2021. Real GDP growth in Q4:21 accelerated to 6.9% (SAAR) from 2.3% in Q3. It was the strongest growth since Q3:20. During all of 2021, growth picked up to 5.7%, the fastest increase since 1984. A 5.5% GDP rise in Q4 had been expected in the Action Economics Forecast Survey.

Inventory accumulation added 4.9 percentage points to Q4 growth following a 2.2 point addition in Q3. The rise was the strongest since Q3:20 and close to the post WWII record. International trade had no effect on growth last quarter after subtractions in the prior five quarters. Exports grew 24.5% (5.3% y/y) while imports rose 17.7% (9.6% y/y).

Domestic final sales growth picked up to 1.9% last quarter (5.3% y/y) from 1.3% in Q3 as consumer spending rose 3.3% (7.1% y/y). Spending on services rose 4.7% (7.1% y/y) as recreation outlays jumped 20.1% (28.7% y/y) and transportation spending surged 20.2% (30.2% y/y). Housing & utilities spending edged 0.2% higher (1.0% y/y). Spending on durable goods rose 1.6% (6.4% y/y) including a 6.6% decline (-4.0% y/y) in motor vehicle buying and an 11.8% surge (13.3% y/y) in spending on recreational goods. Nondurable goods spending eased 0.1% (+7.7% y/y) as apparel outlays fell 2.4% (+16.1% y/y).

Business fixed investment grew 2.0% last quarter (6.3% y/y) after rising 1.6% in Q3. Structures investment fell 11.4% (-3.5% y/y) but equipment outlays rose 0.8% (5.9% y/y). Investment in intellectual property strengthened 10.6% (11.9% y/y) in Q4.

Residential investment outlays weakened 0.8% in Q4 (-2.2% y/y) after falling sharply in the prior two quarters.

Government spending declined 2.9% last quarter and was unchanged y/y. Federal government outlays fell 4.0% (-1.0% y/y) owing to a 5.7% drop (-3.6% y/y) in defense spending. State & local government purchases weakened 2.2% (+0.6% y/y).

Pricing pressures remained strong last quarter. The GDP price index rose 6.9% (5.8% y/y) after a 6.0% Q3 gain. A steady 6.0% rise had been expected. The personal consumption price index strengthened 6.5% (5.5% y/y) owing to a 10.8% surge (8.3% y/y) in the goods price index. The consumer services price measure increased 4.3% (4.1% y/y) in Q4. The business fixed investment price index strengthened 7.5% (3.3% y/y) owing to a 23.2% rise (11.6% y/y) in structures prices. The residential investment price index gained 9.5% (13.0% y/y) last quarter.

The GDP figures 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. Both databases include tables of the newly published not seasonally adjusted data. The Action Economics consensus estimates can be found in AS1REPNA.

Chained 2012 $ (%, AR) Q4'21 (Advance Estimate) Q3'21 Q2'21 Q4'21 Y/Y 2021 2020 2019
Gross Domestic Product 6.9 2.3 6.7 5.5 5.7 -3.4 2.3
  Inventory Effect (% point) 4.9 2.2 -1.3 1.2 0.3 -0.5 0.1
Final Sales 1.9 0.1 8.1 4.7 5.4 -2.9 2.2
  Foreign Trade Effect (% point) 0.0 -1.3 -0.2 0.6 -1.1 -0.4 -0.2
Domestic Final Sales 1.9 1.3 8.0 5.3 6.5 -2.5 2.4
Demand Components
  Personal Consumption Expenditure 3.3 2.0 12.0 7.1 7.9 -3.8 2.2
  Nonresidential Fixed Investment 2.0 1.6 9.2 6.3 7.3 -5.3 4.3
  Residential Investment -0.8 -7.7 -11.7 -2.2 9.0 6.8 -0.9
  Government Spending -2.9 0.9 -2.0 0.0 0.5 2.5 2.2
Chain-Type Price Index
   GDP 6.9 6.0 6.1 5.8 4.2 1.3 1.8
    Personal Consumption Expenditure 6.5 5.3 6.5 5.5 3.9 1.2 1.5
       Less Food & Energy 4.9 4.6 6.1 4.6 3.3 1.4 1.7
    Nonresidential Investment 7.5 4.3 0.9 3.3 1.5 0.6 1.3
    Residential Investment 9.5 14.8 15.3 13.0 10.8 3.3 2.9
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