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Last Update: 27-Jan-12 10:12 ET
Q4 GDP Falls Short of Expectations
The advance estimate showed real GDP increased at an annual rate of 2.8% in the fourth quarter. That was below the Briefing.com consensus estimate of 3.2%, but the real focal point for the market is that the bulk of the increase stemmed from the change in private inventories, which increased $56.0 bln and contributed 1.94 percentage points to the fourth quarter change in real GDP.
Real final sales, which exclude the change in inventories, rose just 0.8% after a 3.2% increase in the third quarter.
An acceleration in personal consumption expenditures (+2.0%) and in residential fixed investment (+10.9%) provided positive contributions to the change in GDP, adding 1.45 percentage points and 0.23 percentage points, respectively. A downturn in federal government spending (-7.3%), a deceleration in nonresidential fixed investment (+1.7% from +15.7% in Q3), an acceleration in imports (+4.4% from +1.2% in Q3), and a larger decrease in state and local government spending (-2.6%), the BEA said, partly offset the strength in other areas.
The concern for the market is that the change in inventories will act as a drag on Q1 GDP growth since there is unlikely to be a build from current levels. Accordingly, there is a bit of a sting in the thought that Q1 GDP could fall back to the "new normal" zone that is closer to 2.0%.
Real final sales, which exclude the change in inventories, rose just 0.8% after a 3.2% increase in the third quarter.
An acceleration in personal consumption expenditures (+2.0%) and in residential fixed investment (+10.9%) provided positive contributions to the change in GDP, adding 1.45 percentage points and 0.23 percentage points, respectively. A downturn in federal government spending (-7.3%), a deceleration in nonresidential fixed investment (+1.7% from +15.7% in Q3), an acceleration in imports (+4.4% from +1.2% in Q3), and a larger decrease in state and local government spending (-2.6%), the BEA said, partly offset the strength in other areas.
The concern for the market is that the change in inventories will act as a drag on Q1 GDP growth since there is unlikely to be a build from current levels. Accordingly, there is a bit of a sting in the thought that Q1 GDP could fall back to the "new normal" zone that is closer to 2.0%.
