March 27, 2014

4Q14 Gross Domestic Product, Third Estimate (032714): An Annualized 2.6%

Filed under: Economy,Taxes & Government — Tom @ 8:58 am

Predictions:

Here are the six main elements of GDP as reported in January and February (will fill in with today’s numbers once released):
- Personal consumption expenditures: +2.26, +1.73
- Gross Private Investment (sans inventories): +0.14, +0.58
- Inventories: +0.42, +0.14
- Exports: +1.48, +1.22
- Imports: -0.15, -0.24
- Government: -0.93, -1.05
- Total: +3.22, +2.38

I don’t know where the forecasters expect the pickups to be. I wouldn’t be surprised if consumption ticks down a bit (see: Obamacare Christmas). Private investment could go up, given the upward revision to new home sales. We may also find that the government’s so-called fiscal drag hasn’t had as much impact.

The report will be here at 8:30 a.m.

HERE IT IS (permanent link):

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.6 percent in the fourth quarter of 2013 (that is, from the third quarter to the fourth quarter), according to the “third” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 4.1 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 2.4 percent. With this third estimate for the fourth quarter, the general picture of economic growth remains largely the same; personal consumption expenditures (PCE) was larger than previously estimated, while private investment in inventories and in intellectual property products were smaller than previously estimated (see “Revisions” on page 3).

The increase in real GDP in the fourth quarter primarily reflected positive contributions from
PCE, exports, and nonresidential fixed investment that were partly offset by negative contributions from
federal government spending and residential fixed investment. Imports, which are a subtraction in the
calculation of GDP, increased.

The deceleration in real GDP growth in the fourth quarter reflected a downturn in private inventory investment, a larger decrease in federal government spending, a downturn in residential fixed investment, and a deceleration in state and local government spending that were partly offset by accelerations in PCE and in exports, a deceleration in imports, and an acceleration in nonresidential fixed investment.

Okay, it was close to predictions. Now let’s look at the elements (today’s release in bold):

  • Personal consumption expenditures: +2.26, +1.73, +2.22
    — Goods: +1.12, +0.72, +0.66
    — Services: +1.14, +1.00, +1.57
  • Gross Private Investment (sans inventories): +0.14, +0.58, +0.43
  • Inventories: +0.42, +0.14, -0.02
  • Exports: +1.48, +1.22, +1.23
  • Imports: -0.15, -0.24, -0.24
  • Government: -0.93, -1.05, -0.99 (-0.70 in national defense)
  • Total: +3.22, +2.38, +2.63

So if it weren’t for a big 0.57-point rise in consumption of services in the final revision (major component: Health care, +0.42), today’s revision would gone a few tenths of a point in the other direction.

Health care spending’s fourth-quarter contribution to GDP of 0.62 points is the largest in at least four years. The guess here is that during the fourth quarter a lot of people who figured out they had lost coverage under old individual plans might have rushed to get and pay for medical visits and procedures which were largely covered under their old plans but which won’t be under the new high-deductible Obamacare plans — AND to pay final visits to doctors and providers they either knew or thought they couldn’t keep after Jan. 1.

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