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Economy in Brief

U.S. GDP Growth Revised Higher in Q4'20; Corporate Profits Decline
by Tom Moeller  March 25, 2021

• Activity remains 2.4% below Q4'19 peak.

• Corporate earnings drop follows Q3 surge.

• Business fixed investment led growth at yearend.

Real GDP rose 4.3% (SAAR) during Q4'20 (-2.4% y/y), revised from 4.1%, following a record 33.4% jump during Q3. Expectations had been for a 4.1% rise in the Action Economics Forecast Survey.

Corporate profits after tax w/o IVA & CCA weakened 1.7% (+4.1 y/y) following a 36.1% jump in Q3. Before tax earnings with IVA & CCA declined 1.4% (-0.7% y/y) as nonfinancial sector profits fell 3.4% (+3.9% y/y) and financial sector earnings surged. Foreign sector earnings eased 0.2% (-16.0% y/y).

Inventory accumulation added 1.4 percentage points to growth last quarter, revised from 1.1, after adding 6.6 points in Q3. Foreign trade deficit deterioration subtracted an unrevised 1.5 percentage points from growth. Exports rose 22.3% (-10.9% y/y) following a 59.6% jump while imports strengthened 29.9% (-0.5% y/y) after surging 93.0%.

Domestic final sales increased an unrevised 4.4% (-1.5% y/y) following a 29.8% Q3 gain. Consumer spending rose a lessened 2.3% (-2.7% y/y) following a 41.0% Q3 rise. Durable goods spending eased 1.1% (+11.6% y/y) after gaining 82.7% in Q3. Nondurable goods spending fell 1.6% (+4.1% y/y) following a 31.1% gain. Outlays on services increased 4.3% (-6.8% y/y) following a 38.0% Q3 rise.

Business fixed investment grew 13.1% (-1.4% y/y), revised from 14.0% following a 22.9% jump which followed three quarters of decline. Investment in structures fell 6.2% (-16.1% y/y), the fifth consecutive quarterly decline. Equipment investment surged by one-quarter (3.5% y/y) after rising slightly more than two-thirds in Q3.

Residential investment increased by an upwardly revised 36.6% (14.3% y/y) following a roughly two-thirds increase in Q3.

The 0.8% decline (-0.5% y/y) in government spending last quarter compared to a 1.1% decline reported last month. It followed a 4.8% Q3 drop. State and local government spending fell 0.8% (-2.3% y/y), the third consecutive quarterly shortfall. A 0.9% easing in federal government spending (+2.4% y/y) followed a 6.2% Q3 decline.

The expected 2.1% increase (1.3% y/y) in the GDP price index was unrevised as it followed a 3.5% gain during Q3. The PCE price index rose 1.6% (1.2% y/y), roughly half the Q3 increase. The price index less food & energy was also unrevised at 1.4%, both q/q and y/y, easing from 3.4% in Q3. The business fixed investment price index posted a second straight 0.1% rise (0.5% y/y). The residential investment price index strengthened 6.9% (4.9% y/y) after rising 9.5% in Q3. The government sector price index rose an unrevised 2.8% (1.3% y/y), about as it did in Q3.

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.

Chained 2012 $ (%, AR) Q4'20 (3rd Estimate) Q4'20 (2nd Estimate) Q4'20 (1st Estimate) Q3'20 Q2'20 Q4'20 Y/Y 2020 2019 2018
Gross Domestic Product 4.3 4.1 4.0 33.4 -31.4 -2.4 -3.5 2.2 3.0
  Inventory Effect (%-point) 1.4 1.1 1.0 6.6 -3.5 -0.3 -0.3 0.0 0.2
Final Sales 2.9 3.0 3.0 25.9 -28.1 -2.7 -2.9 2.2 2.8
  Foreign Trade Effect (%-point) -1.5 -1.5 -1.5 -3.2 0.6 -1.2 -0.2 -0.1 -0.2
Domestic Final Sales 4.4 4.4 4.4 29.8 -27.1 -1.5 -2.7 2.3 3.0
Demand Components
  Personal Consumption Expenditure 2.3 2.4 2.5 41.0 -33.2 -2.7 -3.9 2.5 2.7
  Nonresidential Fixed Investment 13.1 14.0 13.8 22.9 -27.2 -1.4 -3.7 2.5 6.9
  Residential Investment 36.6 35.8 33.5 63.0 -35.5 14.3 6.1 -1.7 -0.6
  Government Spending -0.8 -1.1 -1.2 -4.8 2.5 -0.5 1.1 2.3 1.8
Chain-Type Price Index
   GDP 2.1 2.1 2.0 3.5 -1.8 1.3 1.2 1.8 2.4
    Personal Consumption Expenditure  1.6 1.6 1.5 3.7 -1.6 1.2 1.2 1.5 2.1
       Less Food & Energy 1.4 1.4 1.4 3.4 -0.8 1.4 2.4 1.7 2.0
    Nonresidential Investment 0.1 0.1 0.4 0.1 0.8 0.5 0.5 1.3 0.9
    Residential Investment 6.9 6.9 6.0 9.5 1.0 4.9 3.3 2.8 5.6
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