GDP

April 9, 2026

The final estimate of fourth quarter GDP rose 0.5% which compares to the preliminary estimate of 1.4% and the revised estimate of 0.7%.   GDP rose 4.4%in the third quarter.  Much of the shortfall in fourth quarter growth was attributable to the government shutdown which subtracted 1.2% from GDP growth in that quarter.

Final sales is GDP less the change in nonfarm business inventories.  Final sales climbed by 0.3% in the fourth quarter after jumping by 4.5% in the third quarter.

Final sales to domestic purchasers is GDP less the change in both inventories and trade.  Final sales to domestic purchasers rose 0.6% in the fourth quarter after climbing by 2.8% in the third quarter.

Personal consumption expenditures rose 1.9% in the fourth quarter after having jumped by 3.5% in the third quarter.  Consumers continue to spend at a moderate pace.  With real disposable income having risen 1.1% in the past year and real personal consumption expenditures rising 2.5%, consumer spending may slow somewhat in the months ahead.  For what it is worth we expect consumer spending to increase 1.2% in 2026.

Nonresidential investment rose 2.4% in the fourth quarter after gaining 3.2% in the third quarter. Spending on structures declined 6.5% in the fourth quarter.  Equipment spending climbed by 4.3%.  Intellectual property rose at a 5.4% pace.  In the past year intellectual property has risen 8.0%  This is AI in action.  Firms are working hard to find ways to adopt AI and make their employees become more productive.  Rapid growth in this category should climb for years to come.

Residential investment fell 1.7% in fourth quarter after dropping by 7.1% in the third quarter.  The housing sector was showing some early signs of a rebound, but the recent increase in mortgage rates from 6.0% to 6.5% will probably postpone the recovery in housing until later in the year.

The deficit for real net exports widened by $13.2 billion in the fourth quarter to $968.7 billion after narrowing by $102.5 billion in the third quarter.

Federal government expenditures plunged by 16.7% in the fourth quarter after having risen by 2.6% in the third quarter.  In the fourth  quarter defense spending sank by 10.7% while nondefense spending declined 24.4%,  The drop-off in federal government spending subtracted 1.2% from GDP growth in the fourth quarter and was caused primarily by the government shutdown,

For what it is worth we expect GDP growth of 2.0% in the first quarter and we look for GDP growth of 2.5% for the year.   .

Stephen Slifer

NumberNomics

Charleston, S.C.