March 28, 2024
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The final estimate of fourth quarter GDP growth was 3.4% compared to the revised estimate of 3.2%… That compares to a 4.9% increase in the third quarter. While the perception is that the economy is slowing down, it is hard to find much evidence to support that notion in data for the fourth quarter.
Final sales, which is GDP excluding the change in business inventories, rose 3.9% in the fourth quarter Given an increase in GDP of 3.4% and a 3.9% increase in final sales, the increase in inventories subtracted 0.5% from GDP growth in the fourth quarter.
Final sales to domestic purchasers which excludes both the change in inventories and trade rose 3.6% in the fourth quarter after climbing 3.5% in the third quarter.. With a 3.9% increase in final sales and a 3.6% increase in final sales to domestic purchasers, the trade component added 0.3% to GDP growth in the fourth quarter as exports rose 5.1% and imports rose 2.2%.
Consumption spending gained 3.3% in the fourth quarter after having climbed jumped 3.1% in the third quarter. Consumers continue to spend at a moderate pace despite higher interest rates and still rapid inflation. Spending on goods rose 3.0% in the fourth quarter while spending on services climbed by 3.4%.
Residential investment rose 2.8% in the fourth quarter after having climbed 6.7% in the third quarter. Housing took the brunt of higher mortgage rates and soaring home prices and the recent upturn signals that this category has finally hit bottom. With current homeowners reluctant to put their house on the market and the supply of homes on the market at an all-time record low level, potential home buyers have turned to new homes where supply is more plentiful as an alternative. Builders have been trying to ramp up production, but shortages of labor and difficulty in finding sizeable lots to develop means that the increases in this category in the quarters ahead may be limited.
The foreign sector as measured by the deficit for real net exports narrowed by $12.2 billion in the fourth quarter to $918.5 billion after having widened by $2.5 billion in the third quarter. Exports tose 5.1% in the third quarter while imports climbed by 2.2%.
.Federal government spending rose 2.4% in the fourth quarter after having jumped 7.1% in the third quarter. Defense spending rose 0.5% while nondefense spending gained 4.8%.
We expect GDP to expand at about a 2,2% pace in the first two quarter of this year. The economy keeps cranking out jobs and wages keep rising which will boost consumer income and spending.
Stephen Slifer
NumberNomics
Charleston, SC
Mr. Slifer –
The fed in last 3 months since the September spike has injected approximately $60 billion/month into the “repo” market, and plans to potentially add as much as another half trillion by mid January, according to reports in the Financial Times. Mr. Powell rejected comparisons of this with earlier Quantitative Easing, insisting it was different. Since the repo market is for overnight or short term loans, one assumes these massive amounts will be repaid promptly, though there has been no mention of that in the papers. Such massive amounts of money would seem to contribute to the bullish equity markets we’re seeing. Can you educate me as to how these injections of credit influence the market, GDP, etc?
Hi Frank,
Thanks for your comment and sorry for the delayed response. Your question is not an easy one to answer so rather than a lengthy explanation here I will respond to your personal e-mail address. Thanks for your question. it is a good one.
Steve
Steve –
The second graph in this section, “Final Sales”, has the x-axis mislabeled in regard
to the applicable dates.
Hi Frank. Merry Christmas. You are right. The data shown are for the dates I wanted, but somehow the x-axis was messed up. I changed it in the original. Thanks for the catch.
Steve