The BEA’s second estimate for 4th quarter 2016 GDP remains unchanged from the advance reading of 1.9%.
The Econoday consensus estimate was 2.1% in a range of 2.0% to 3.1%. Thus, not a single economist managed to peg the number.
The second revision to fourth-quarter GDP shows little change, actually no change at the headline level which remains at 1.9 percent annualized growth. But good news comes from consumer spending which gets a 5 tenths of a percentage point upgrade to a 3.0 percent rate and a 2.1 percent contribution. Durables, reflecting vehicle sales, are the standout at an 11.5 percent rate (nondurables at plus 2.8 percent and services at plus 1.8 percent). Nonresidential fixed investment gets a small downgrade to a 0.2 percent contribution with residential investment also getting a small downgrade but still solid at a 0.4 percent contribution.
Inventories show little change in the revision, rising what may prove an unwanted $46.2 billion and contributing 9 tenths of a percentage point or nearly half of the quarter’s total growth. Net exports are unchanged, subtracting 1.7 percentage points as exports fell sharply and imports rose even more sharply. Government purchases get a downgrade, contributing only a small fraction to the quarter’s GDP.
The fourth quarter was mixed with negatives led by net exports and the questionable inventory build. But the positives are clear, a consumer that was spending and also investing in housing.
Consumer Metrics
Rick Davis at Consumer Metrics writes:
In their second estimate of the US GDP for the fourth quarter of 2016, the Bureau of Economic Analysis (BEA) reported that the US economic growth rate was +1.85%, essentially unchanged from the +1.87% previously reported but down by nearly half (-1.68%) from the prior quarter.
Although there was no material change in the headline number, the composition of that number was revised in several ways. Consumer spending on goods and services was revised upward by an aggregate of +0.35%. Meanwhile fixed commercial investment, inventories and governmental spending were revised in aggregate downward by -0.37% — completely offsetting the consumer gains.
The BEA’s “bottom line” (their “Real Final Sales of Domestic Product”, which excludes the growing inventories) continues to record a sub 1% growth rate (+0.91%), down over 2% (-2.13%) from 3Q-2016.
Real annualized household disposable income was reported to have grown by $127 quarter-to-quarter, to an annualized $39,481 (in 2009 dollars). The household savings rate was unchanged at 5.6%.
For the fourth quarter the BEA assumed an effective annualized deflator of 2.03%. During the same quarter (October 2016 through December 2016) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was 3.05%. Under estimating inflation results in correspondingly over optimistic growth rates, and if the BEA’s “nominal” data was deflated using CPI-U inflation information the headline growth number would have been below 1%, at a +0.87% annualized growth rate.
Looking Ahead
Looking ahead, housing is questionable. Also, how long can increasing incentives keep autos humming?
The rising CPI is also a huge minus for real spending and real GDP.
Once again, despite huge jumps in reported jobs (assuming one believes the numbers), the economy struggles to hit a modest 2% growth even with an inventory build that contributed nearly half of the reported 1.9% growth.
Mike “Mish” Shedlock
All these “new jobs” + 1.9% GDP growth = NEGATIVE productivity increase.
Wonderful.
Have we fully entered the era of “managed information”?
If you want us to be, we have.
Then again, if you don’t, that outcome can be managed as you wish.
Even if those publishing the information wanted to manage it, they simply have no clue themselves what what the information they try to manage really is. It is plain impossible for them, nor anyone else, to have such a clue, since the measurement yardstick, the dollar, is not in any way fixed anymore.
When things were measured in Gold, the amount of gold in circulation was relatively stable, so people’s measuring sticks were fairly reliable: The level of efficiency improvements/economic growth were directly reflected in how much more stuff a set amount of gold bought.
What we have now, is akin to trying to do engineering, if the ISO, and private sector banksters, keeps adding centimeters to the standard meter willy nilly. Just because some well connected halfwits feel it benefits them personally, and the public at large is too dumb and indoctrinated to realize how idiotic doing so really is.
So while there is little doubt that the same sleazeballs who benefits and cheer for debasing the meter by adding centimeters, will also do their darndest to “manage” the information their underlings are privy to; even they themselves have no clue what the underlying truth is. IOW, they have been so busy and successful at constructing a lie, that they themselves no longer have any way of discerning the truth. So you truly have a situation of the blind leading, and scamming, the blind.
Noone knows anything. Noone understands anything. And since it obviously benefits them, the wealthy, well connected and powerful, are perfectly happy for it to remain that way. And the rest don’t know any better, hence aren’t in much of a position to pose a challenge to them.
About those jobs. There is an annual job cycle which peaks in November and in January jobs are massively lost. Here are Januaries:
http://cursorylook.blogspot.com/2017/02/januaries-job-losses.html
About those jobs. January 2017 started out badly from recent years.
http://cursorylook.blogspot.com/2017/02/january-jobs-from-year-ago.html
“Real annualized household disposable income was reported to have grown by $127 quarter-to-quarter, to an annualized $39,481 (in 2009 dollars)”
Anyone know how “Real annualized household disposable income” is calculated and defined? Seems to me that this number is a good indicator of the economy..
They have an estimated number of households. Here is a picture of real personal disposable income per capita. For December 2016 it is 1.4 percent higher than December 2015. I don’t know why there was so much volatility but recently the line is heading down.
http://cursorylook.blogspot.com/2017/02/real-personal-disposable-income-per.html
I thought the inclusion of “unexpectedly” in the headline was great.
What would be unexpected would be for GDP to exceed the consensus or even more unexpected, for the experts to be right!
“The 11.5% stand out rate for vehicle sales”. Read a report that most of the sub-prime loans funding this car buying spree are issued by the car companies in-house finance arms. So while all the fuss is about repealing Dodd Frank and Mexico, it could be that the next bail out will be the car companies themselves. They appear to have liabilities exceeding $0.5 trillion.
Oh Gosh…lets see here…the Consumer was Spending in the 4th Qtr..correct? Last Time I looked….Holiday Sales.seem to miraculously appear here Every Year…lolol
We’ve got the furniture retailers offering “nothing down no interest until 2022” ads running right now , even on better quality brands.
I can’t see getting an invoice in the mail in 2022 requesting payment on my five year old sofa sectional group. Either that or the 2017 showroom traffic stalls to a crawl. Who needs productivity? Gimme my social credit!