Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

BEA Estimates US 4th Quarter 2016 GDP at 1.87%

Economics / US Economy Jan 27, 2017 - 03:39 PM GMT

By: CMI

Economics

In their first (preliminary) estimate of the US GDP for the fourth quarter of 2016, the Bureau of Economic Analysis (BEA) reported that the US economic growth rate was +1.87%, down by nearly half (-1.66%) from the prior quarter.

The quarter to quarter decline in the headline growth rate came from a number of sources: the growth of consumer spending on services was more than halved (down -0.68%), exports went into contraction (off a dramatic -1.69%) and imports were down yet another -0.86%. Partially offsetting those declines were upticks in consumer spending on goods (up +0.34%), and increases in the growth rate for commercial fixed investment (+0.65%) and inventories (+0.51%).


The BEA's "bottom line" (their "Real Final Sales of Domestic Product", which excludes the growing inventories) recorded a sub 1% growth rate (+0.87%), down over 2% (-2.17%) from 3Q-2016.

Real annualized household disposable income was reported to have grown by $177 quarter-to-quarter, to an annualized $39,405 (in 2009 dollars). The household savings rate decreased by -0.2% to 5.6%.

For the fourth quarter the BEA assumed an effective annualized deflator of 2.12%. During the same quarter (October 2016 through December 2016) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was 3.41%. Under estimating inflation results in correspondingly over optimistic growth rates, and if the BEA's "nominal" data was deflated using CPI-U inflation information the headline growth number would have been much lower, at a +0.62% annualized growth rate.

Among the notable items in the report :

-- The headline contribution from consumer expenditures for goods increased to a +1.11% growth rate (up +0.34% from the prior quarter).

-- The contribution to the headline from consumer spending on services declined to +0.58% (down -0.68% from the prior quarter). Most of the decline appeared in spending for housing and utilities. The combined consumer contribution to the headline number was +1.69%, down -0.34% from 3Q-2016.

-- The headline contribution from commercial private fixed investments was +0.67%, up +0.65 from an essentially flat prior quarter. That growth is about equally split between residential and commercial construction.

-- The contribution from inventories was +1.00%, more than double the +0.49% growth rate recorded during the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity price or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.

-- The positive headline contribution from governmental spending improved by +0.07% to +0.21%. The entirety of this increase was in state and local capital expenditures, with Federal expenditures contracting (-0.08%, as expected) as they "gave back" the fiscal year-end spending previously moved forward -- a recurring annual phenomenon that artificially boosts pre-election economic reports.

-- Exports crashed into contraction (-0.53%) quarter-to-quarter, down -1.69% from the prior quarter.

-- Imports subtracted yet another -1.17% from the headline number, down -0.86% from the prior quarter.

-- The "real final sales of domestic product" was a relatively weak +0.87%, down over 2% (-2.17%) from the prior quarter. This is the BEA's "bottom line" measurement of the economy and it excludes the reported inventory growth.

-- As mentioned above, real per-capita annual disposable income was reported to have grown by $177 quarter-to-quarter. At the same time the household savings rate declined yet another -0.2% to 5.6%, now some -0.3% lower than the level recorded in the second quarter of 2016. It is important to keep this line item in perspective: real per-capita annual disposable income is up only +7.44% in aggregate since the second quarter of 2008 -- a meager annualized +0.85% growth rate over the past 34 quarters.

The Numbers

As a quick reminder, the classic definition of the GDP can be summarized with the following equation :

GDP = private consumption + gross private investment + government spending + (exports - imports)

or, as it is commonly expressed in algebraic shorthand :

GDP = C + I + G + (X-M)


In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows :

The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table below we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Final Sales of Domestic Product" and listed the quarters in columns with the most current to the left :

Summary and Commentary

In their prior report that covered the pre-election economy, the BEA told us that the US GDP was growing at a 3.53% annualized rate -- a "happy days are here again" kind of number. Now we are told that during the fourth quarter those happy numbers were essentially halved. And even that headline may have been optimistic:

-- The BEA's own "bottom line" final sales growth rate dropped over 2% and was below 1% (+0.87%) -- once rapidly growing inventories were factored out.

-- The inflation neutralizing deflator they used (+2.12%) was materially below the inflation rate recorded by the BEA's sister agency, the Bureau of Labor Statistics (+3.41%). Using the BLS data to deflate the numbers also results in a sub 1% growth rate (+0.62%).

-- We can expect the trade numbers to change materially in the next two monthly revisions.

As we mentioned last month, December's 3.5% third quarter growth rate was truly impressive. January's fourth quarter 1.9% is just "kind of, sort of" OK. And the BEA's "bottom line" sub 1% growth rate is somewhat less than OK. It will be interesting to see just how this headline holds up in the upcoming revisions.

Consumer Metrics InstituteTM
Home of Daily Consumer Leading Indicators

http://www.consumerindexes.com

© 2017 Copyright Consumer Metrics Institute - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in