The Advance Estimate for Q4 GDP, to one decimal, came in at 2.6 percent, a decline from 5.0 percent in Q3. Today's number disappointed mainstream economists' estimates, which were for a a smaller decline. For example, the Wall Street Journal survey of economists averaged 3.0 percent in their forecasts, and the frequently more accurate Investing.com also had an estimate of 3.0 percent.
Here is an excerpt from the Bureau of Economic Analysis news release:
Real gross domestic product — the value of the production of goods and services in the United States, adjusted for price changes — increased at an annual rate of 2.6 percent in the fourth quarter of 2014, according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 5.0 percent.
The Bureau emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4 and "Comparisons of Revisions to GDP" on page 5). The "second" estimate for the fourth quarter, based on more complete data, will be released on February 27, 2015.
The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP growth in the fourth quarter primarily reflected an upturn in imports, a downturn in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by an upturn in private inventory investment and an acceleration in PCE.
The price index for gross domestic purchases, which measures prices paid by U.S. residents, decreased 0.3 percent in the fourth quarter, in contrast to an increase of 1.4 percent in the third. Excluding food and energy prices, the price index for gross domestic purchases increased 0.7 percent, compared with an increase of 1.6 percent. [Full Release]
Here is a look at GDP since Q2 1947 together with the real (inflation-adjusted) S&P Composite. The start date is when the BEA began reporting GDP on a quarterly basis. Prior to 1947, GDP was reported annually. To be more precise, what the lower half of the chart shows is the percent change from the preceding period in Real (inflation-adjusted) Gross Domestic Product. I've also included recessions, which are determined by the National Bureau of Economic Research (NBER).
Here is a close-up of GDP alone with a line to illustrate the 3.3 average (arithmetic mean) for the quarterly series since the 1947. I've also plotted the 10-year moving average, currently at 1.6 percent.
Here is the same chart with a linear regression that illustrates the gradual decline in GDP over this timeframe.
A particularly telling representation of slowing growth in the US economy is the year-over-year rate of change.
And for a bit of political trivia, here is a look at GDP by party in control of the White House and Congress.
In summary, the Q4 GDP Advance Estimate of 2.6 percent disappointed the forecasts of mainstream economists.
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