U.S. GDP Growth Is Little Revised in Q4’22; Corporate Profits Decline

Real GDP grew 2.6% at an annual rate (0.9% y/y) during Q4'22, revised from 2.7%. It followed 3.2% growth in Q3, and declines in Q2’23 as well as in Q1’23. The latest figure compares to expectations for a 2.7% gain in the Action Economics Forecast Survey.

Corporate profits fell 2.0% last quarter (+2.6% y/y) following little change in Q3. Dividends fell 1.8% (-4.4% y/y, off for the third straight quarter. After-tax earnings without IVA & CCA weakened 5.9% (-1.4% y/y) after falling 5.0% in the third quarter.

Faster inventory accumulation added an unrevised 1.5 percentage point to GDP growth last quarter following a 1.2 percentage point subtraction in Q3. Improvement in the foreign trade deficit added 0.4 percentage point to growth, revised from 0.5, last quarter after a 2.9 percentage point addition in Q3. The gain occurred as exports fell 3.7% (+4.6% y/y), revised from -1.6%, after rising 14.6% in Q3. Imports weakened 5.5% (+1.5% y/y), revised from -4.2%, following a 7.3% Q3 decline.

Growth in domestic final demand slowed to an unrevised 0.7% (+0.9% y/y) following a 1.5% Q3 rise. Real personal consumption expenditure growth of 1.0% (1.7% y/y) was revised from 1.4% and followed 2.3% growth in Q3. Durable goods outlays fell a lessened 1.3% (+0.6% y/y). Spending on motor vehicles & parts gained an upwardly revised 4.1% (-1.4% y/y), and furniture & appliance outlays declined 0.4% (-0.4% y/y), revised from a -0.8%. The decline in spending on recreational goods & vehicles was lessened to -3.1% (-4.5% y/y) from -3.9%. In the nondurable goods sector, spending rose 0.6% (-1.6% y/y), revised from 0.2%. Outlays on food & beverages held steady (-5.1% y/y), revised from a 0.3% shortfall, following three straight quarters of decline. Clothing outlays rose 0.6% (+1.4% y/y), revised from a 0.1% slip while gasoline & oil expenditures rose a little-changed 1.3% (-3.5% y/y), also following three straight quarters of decline. Purchases of services improved a downwardly revised 1.6% (3.0% y/y) after a 3.7% rise. Housing & utilities outlays gained 2.2% (1.5% y/y) and health care outlays increased a strengthened 6.7% (3.0% y/y), after rising 5.6% in Q3. Spending on recreation increased an improved 4.6% (4.8% y/y) while spending at restaurants & hotels rose 2.3% (5.7% y/y), the weakest rise in three quarters.

Business fixed investment rose 4.0% (4.5% y/y), revised from 3.3%, in Q4’22 after strengthening 6.2% in Q3. Structures investment rose an increased 15.7% (-1.8% y/y), revised from 0.4%, but had been falling since the end of 2019. Equipment investment fell a little-changed 3.5% (+3.9% y/y), reflecting a marginally revised 23.9% decline (-2.3% y/y) in information processing equipment and a 30.6% rise (27.9% y/y) in transportation equipment. Investment in industrial equipment rose a downwardly revised 5.8% (-0.2% y/y) while investment in intellectual property products rose a shaved 6.2% (8.2% y/y), remaining strong since the end of the 2020 recession.

Residential investment declined for the seventh consecutive quarter, weakening a little-revised 25.1% (-18.8% y/y) in Q4, about the same as in Q3.

Government spending increased a little-changed 3.8% (0.9% y/y) in Q4’22, about the same as in Q3. Federal government spending surged a little-changed 5.8% (0.1% y/y) as defense spending rose 2.2% (-0.2% y/y). Nondefense outlays jumped 10.6% (0.4% y/y) following a 2.5% increase. State & local government spending rose a little-changed 2.6% (1.3% y/y) after increasing 3.7% in Q3.

The GDP chain price index increased an unrevised 3.9% (6.4% y/y) last quarter, the weakest increase in two years. It was down from a 9.0% rise in Q2. The Action Economics Forecast Survey expected a 3.9% increase. The PCE chain price Index rose an unrevised 3.7% (5.7% y/y), after increasing 4.3% in Q3. The PCE price index less food & energy gained 4.4% (4.8% y/y), revised from 4.3%, down from 5.6% in Q1. The nonresidential investment price index rose a minimally changed 3.6% (6.6% y/y). The equipment price index improved 6.1% (7.2% y/y). The intellectual property products price index slipped an unchanged 0.6% (+2.2% y/y) after firm increases in the prior six quarters. The residential investment price index rose a lessened 5.1% (11.7% y/y), the weakest increase since Q2 2020. The government spending price index rose 3.6% (6.8% y/y), remaining the weakest increase in two years.

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.