There was much hope that when Q3 GDP soared to 5%, primarily on the back of Obamacare spending recalendarization and a massive consumption/personal saving data revision, that the US economy would finally enter lift-off mode. Those hopes were reduced by about 60% when moments ago the BEA announced that Q4 GDP was revised from the original 2.64% print to only 2.18%, which while better than expected, was the lowest economic growth rate since the "polar vortex."
The main reason for the revision: a substantial drop in growth contribution from private inventories, which instead of adding 0.82% to the bottom GDP line, only contributed 0.12% in Q4 following the first revision. To be sure, this was perfectly expected, and is exactly what we said would happen last month after the first inventory number:
... here is what Q4 inventories did: rising by $113.1 billion in Q4, this was the second highest quarterly increase in the 21st century, second only to September 2010. It's all GDP-crushing liquidations from here.
Following out post, the BEA revised the entire data series.
Some other changes:
- Personal Consumption was 2.83% of the final GDP, down from 2.87%
- Fixed Investment was 0.71%, vs 0.37% before, a number that will plunge in Q1 as a result of the shale capex halt.
- Net trade subtracted even more from growth, with Net Exports less Imports amounting to -1.16%, down from -1.02%
- Government offset the decline modestly, subtracting -0.32% from growth, compared to -0.40% in the first revision.
Full breakdown below.