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Q4 GDP Third Estimate at 1.4% Tops Estimates

March 25th, 2016

economyDoug Short:  The Third Estimate for Q4 GDP, to one decimal, came in at 1.4 percent, up from the 1.0 percent for the Advance Estimate. Today’s number was better than most mainstream estimates, with both Investing.com and Briefing.com forecasting 0.8 percent forecasting unchanged at 1.0.

Here is an excerpt from the Bureau of Economic Analysis news release:

Real gross domestic product — the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes — increased at an annual rate of 1.4 percent in the fourth quarter of 2015, according to the “third” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.0 percent.

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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 1.0 percent. With this third estimate for the fourth quarter, the general picture of economic growth remains largely the same; personal consumption expenditures (PCE) increased more than previously estimated (see “Revisions” on page 2).

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

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

Real gross domestic income (GDI), which measures the value of the production of goods and services in the United States as the costs incurred and the incomes earned in production, increased 0.9 percent in the fourth quarter, compared with an increase of 2.0 percent in the third. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 1.1 percent in the fourth quarter, compared with an increase of 2.0 percent in the third. [Full Release]

Here is a look at Quarterly GDP since Q2 1947. Prior to 1947, GDP was calculated annually. To be more precise, the chart shows is the annualized percent change from the preceding quarter in Real (inflation-adjusted) Gross Domestic Product. We’ve also included recessions, which are determined by the National Bureau of Economic Research (NBER). Also illustrated are the 3.24% average (arithmetic mean) and the 10-year moving average, currently at 1.41 percent.

Quarterly GDP since 1947

Note: The headline 1.4% GDP is 1.39% at two decimal places.

Here is a log-scale chart of real GDP with an exponential regression, which helps us understand growth cycles since the 1947 inception of quarterly GDP. The latest number puts us 14.6% below trend, the largest negative spread in the history of this series.

with a Regression

A particularly telling representation of slowing growth in the US economy is the year-over-year rate of change.

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