US 4Q 2014 GDP plunges unexpectedly to 2.6, economists expected 3.2

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1/30/15, "US Economic Growth Slows in Q4," istockanalyst.com, Capital Spectator

"US GDP growth fell short of expectations in last year's fourth quarter, the government reports. National output increased 2.6% in the final three months of 2014 vs. the previous quarter (seasonally adjusted annual rate). The consensus forecast was looking for something better—a 3.2% rise, according to Econoday.com's survey of economists.
 
The soft number for headline growth in Q4 is a bit surprising when you look at the statistical elephant in the room, namely, consumer spending, which accounts for nearly 70% of GDP. Personal consumption expenditures accelerated to a 4.3% pace in the fourth quarter, a handsome improvement over Q3's 3.2% rise. Meanwhile, disposable personal income growth accelerated to 3.8% in Q4 vs. 2.0% in Q3–a bullish sign for consumer spending in the near term.
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So, why the lesser pace of growth for headline GDP? Part of the explanation is due to the slide in government expenditures, which fell 2.2% in Q4. That's a fairly large reversal from Q3's 4.4% gain.

A faster growth rate for imports vs. exports—aka a bigger trade deficit–also weighed on headline GDP. Another corner of disappointment: business spending on equipment—a measure of corporate confidence in the economic outlook–slumped 1.9% in Q4, although it follows back-to-back gains of 11.0%-plus in each of the previous quarters and so some of this may be payback after a run of strength."... 

 


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