- Fourth quarter GDP growth was unrevised at 2.1%, as markets expected.
- Personal consumption expenditure was revised down a tick to 1.7% from 1.8% in the advance estimate. The downward revision was due to weaker consumption of nondurable goods (-0.3% annualized, prev. +0.8%). Both durables and services spending were revised up.
- Non-residential fixed investment was revised down to a 2.3% decline (prev. -1.5%). The downward revision was due to weaker spending on equipment (-4.4% from -2.9%) and intellectual property (+4.0% versus 5.8% previously).
- On the plus side residential investment was revised higher (+6.2% vs 5.8% previously).
- Exports were revised up to 2.0% from 1.4%, while the drop in imports was basically unchanged (-8.6% from -8.7%). The drag from inventories was revised down a touch.
- Core inflation was revised slightly weaker, rising only 1.2% annualized in the fourth quarter (previously 1.3%).
Key Implications
- The BEA is getting better at producing the advance estimate of GDP. The second release has featured fewer revisions than in the past. However, while real GDP was unchanged, there was slightly less domestic spending growth. Final domestic demand – spending by American households, businesses and governments – was revised down a tenth, offset by a smaller drag from inventories.
- With attention squarely focused on the spread of Covid-19 and the economic fallout from containment measures, this report doesn’t provide much new information. Before the outbreak, the U.S. economy had been growing a solid 2.0% pace. But the first quarter of 2020 is likely to take a hit due to the negative impact of Covid-19 and ongoing production shutdown at Boeing.
