US 4Q GDP Beats Expectations
The Q4 GDP growth boost to 1.4% from 1.0% beat estimates thanks to a big service consumption hike to 2.8% growth from 2.1% that fueled a larger than expected consumption growth boost to 2.4% from 2.0%. We otherwise saw the expected $4.9 bln hike for net exports but $3.4 bln trimming in inventories, alongside moderate boosts for private and public construction and tiny downward bumps for spending on equipment and intellectual property. We’ll keep our Q1 GDP growth estimate at 1.8% until we can review Monday’s income report. The Q4 GDP data still show a quarter with a contraction in foreign trade in the face of a weakening global economy and a surging dollar alongside an inventory pullback. We saw a Q4 slowdown in fixed investment growth that was aggravated by a resurgent petro-sector recession, and despite a small “El Nino” construction boost. Real consumption was restrained, with gains more reflective of weak prices than nominal spending strength.
The Q4 GDP growth boost implies a Q4 productivity hike to a 1.6% (was 2.2%) contraction rate that mostly reverses a 2.0% growth clip in Q3, alongside a boost in the Q4 output growth to 1.6% (was 1.0%) after a 1.8% Q3 clip. We expect a trimming in Q4 compensation growth to 1.0% (was 1.1%) after a 2.3% Q3 pace that leaves a unit labor cost trimming to 2.6% (was 3.3%) in Q4 after a 0.4% Q3 rate. The income data from GDP were revised slightly lower to show growth of just 3.1% (was 3.2%) in Q4 after a 4.4% Q3 pace, alongside disposable income growth of just 2.7% (was 2.9%) in Q4 after a 4.5% Q3 pace. We saw a modest trimming in the Q4 savings rate to 5.0% (was 5.1%) that left no change from the Q3 rate. There’s been no savings rate rise with falling oil prices this winter, as recent spending restraint is more a reflection of weak nominal income growth than consumer cautiousness.
Janne Muta
Chief Market Analyst
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