What Changed in the Fourth-Quarter U.S. GDP Report
Feb 26, 2016
Inventory Swing Drives Better Growth FiguresU.S. businesses pared back inventories much less than initially estimated in the fourth quarter. The revised inventory estimate essentially entirely accounts for the upward revision of fourth-quarter growth to a 1% pace from a previously estimated 0.7% gain. The change in private inventories accounted for a 0.14 percentage point drag on growth, rather than the 0.45 point drag estimated a month ago. While the result is a better growth result in final months of 2015, it’s not entirely positive. With larger stockpiles, businesses might not need to increase production this year to meet demand, a factor that could be a headwind to future growth.
Consumer Spending Weaker Than Previously ThoughtHidden behind upgraded economic growth in the fourth quarter was a slowdown in consumer spending. Personal-consumption expenditures advanced at a 2% pace in the fourth quarter. That’s a downward revision from the initial estimate of a 2.2% advance and a deceleration from the third quarter’s 3% annualized gain. Consumer spending on long-lasting goods such as cars, appliances and furniture was not as strong as previously thought in the final three months of 2015.
Decline in Imports Supports Domestic GrowthImports to the U.S. fell in the fourth quarter, a reversal from the government’s initial estimate. U.S. imports fell at a 0.6% pace in the final three months of 2015. That’s revised from the initial reading of a 1.1% advance. Imports subtract from GDP because they reflect overseas production consumed in the U.S. Exports, which also declined in the fourth quarter, add to the measure of domestic output. Most of the import revision reflected a slowdown in goods shipments to the U.S. That’s consistent with a slowdown in consumer spending.
State and Local Governments Pull BackSpending by state and local governments declined at a 1.4% annualized pace in the fourth quarter. That’s a deeper decline than the initially estimated 0.6% decrease. Meanwhile, growth in federal outlays was slightly less robust, but still clearly positive at a 2.2% growth rate. Overall government spending was essentially a neutral factor for GDP last quarter. The first output estimate showed the government to have added 0.12 percentage point to overall growth.