Third quarter GDP growth was revised upward to 3.9% by the Bureau of Economic Analysis following a very strong 4.6% growth rate in the second quarter. Strong preliminary sales data, lower gas prices, and an uptick in personal income in the early stages of the fourth quarter suggest good (but not great) growth of about 3%. Growth of about 3% in the fourth quarter, following strong second and third quarter growth, and a dismal contraction in the first quarter should result in annual growth of about 2.25% for the year.
Fourth quarter GDP growth disappointed with a 2.6% advance estimate compared to economists’ estimates of 3.2%. Personal consumption expenditure, which accounts for about 70% of demand in the U.S. economy, rose 4.3%. Inventories surprised to the upside adding 0.82% to GDP. Exports grew by 2.8%, a slowdown from the previous two quarters, as a rising US Dollar posed a challenge to U.S. exporters. Imports surged making trade a drag on GDP. Government spending was also lower, subtracting 0.4% from growth. Year-over-year (YoY), fourth quarter GDP grew by 2.5%, consistent with the below average post- recession performance.