Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stop Believing The 'Economy' Is The Same As The Stock Market - 12th Jul 20
Spotify Recealed as The “Next Netflix” - 12th Jul 20
Getting Ahead of the Game: What Determines the Prices of Oil? - 12th Jul 20
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

BEA Estimates U.S. Economy 4th Quarter 2015 GDP Growth at 0.69%

Economics / US Economy Jan 29, 2016 - 04:52 PM GMT

By: CMI

Economics

In their first "Preliminary" estimate of the US GDP for the fourth quarter of 2015, the Bureau of Economic Analysis (BEA) reported that the economy was growing at a +0.69% annualized rate, down -1.30% from the third quarter.

All of the key line items in this report showed meaningful deterioration relative to the third quarter. The reported growth in consumer spending was less than half of that recorded during the prior quarter. The growth in fixed investments nearly disappeared, as did growth in governmental spending. Exports continued to crater, showing outright contraction.


In fact, the only good news was that the ongoing inventory contraction weakened, while imports were less of a drag on the rest of the economy (the result of both lower oil prices and generally weakening demand). As we have mentioned a number of times before, the BEA's treatment of inventories can introduce noise and seriously distort the headline number over short terms -- which the BEA admits by also publishing a secondary headline that excludes the impact of inventories. But even this BEA "bottom line" (their "Real Final Sales of Domestic Product") was less than half of what was reported for the prior quarter.

One bright spot was that household income was reported to have grown during the quarter. Real annualized per capita disposable income was reported to be $38,445 per annum, up $197 from the previous quarter. The household savings rate rose to 5.4% -- up +0.2% from the prior quarter.

For this revision the BEA assumed an annualized deflator of 0.82%. During the same quarter (October 2015 through December 2015) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was somewhat lower at 0.47%. Over estimating inflation results in pessimistic growth rates, and if the BEA's "nominal" data was deflated using CPI-U inflation information the headline growth number would be a somewhat better +1.04%.

Among the notable items in the report :

-- The headline contribution from consumer expenditures for goods was cut in half to +0.53% (down -0.55% from the previous quarter).

-- The contribution to the headline from consumer services weakened slightly to +0.93% (down -0.03% from the from the third quarter). The combined consumer contribution to the headline number was +1.46%, down -0.58% from 3Q-2015.

-- The headline contribution from commercial private fixed investments was a negligible +0.03%, down -0.57% from the prior quarter.

-- The contribution from inventories remained negative -- subtracting -0.45% from the headline number. This, however, is an improvement of +0.26% from the -0.71% recorded in 3Q-2015.

-- Governmental spending added only +0.12% to the headline, a contribution that was more than halved from the 0.32% recorded during the previous quarter. The reported growth was exclusively in Federal spending.

-- The contribution to the headline number from exports swung into contraction at -0.31%, significantly less than the essentially neutral reading (+0.09%) in the prior quarter. This contraction is likely to continue until either the dollar or global economic growth reverse direction.

-- Imports subtracted somewhat less from the headline number (-0.16%) than during the previous quarter. Again we can credit dollar growth, oil gluts and weakening domestic demand for this improvement.

-- The "real final sales of domestic product" is now reported to be growing at a +1.14% annualized rate, down substantially (more than halved) from the +2.70% in the prior quarter. This is the BEA's "bottom line" measurement of the economy and it excludes the reported inventory contraction.

-- Also as mentioned above, real per-capita annual disposable income was reported to have grown by $197 during the quarter, and the household savings rate also rose. However, it remains important to keep this improvement in perspective. Real per-capita annual disposable income is up only +4.82% in aggregate since the second quarter of 2008 -- a meager annualized +0.63% growth rate over the past 30 quarters.

The Numbers

As a quick reminder, the classic definition of the GDP can be summarized with the following equation :

GDP = private consumption + gross private investment + government spending + (exports - imports)

or, as it is commonly expressed in algebraic shorthand :

GDP = C + I + G + (X-M)

In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows :

The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table below we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Final Sales of Domestic Product" and listed the quarters in columns with the most current to the left :

Summary and Commentary

This report should be a wake-up call for anyone thinking that the "recovery" is steaming forward in utter isolation from the global slowdown :

-- The recorded growth dropped by nearly two-thirds, critically led by much weaker growth in consumer demand for goods and commercial fixed investments.

-- Exports fell into significant contraction.

-- The sustained growth in consumer spending for services is not discretionary -- it is primarily a consequence of rising Obamacare health care costs.

-- The quarter-to-quarter increase in the household savings rate (to 5.4%) goes a long ways towards explaining the ongoing weak retail sales. Household monies that are no longer being spent at the gasoline pump are simply being saved. This implies that households are not particularly confident when looking forward -- given international headlines and domestic political "fear, uncertainty and doubt" (FUD).

-- Finally, the numbers above show materially weaker economic growth within the US, after several prior lackluster quarters. There is a downward trend in the numbers which, absent an economic miracle, points to economic contraction in the near future.

We should again note that the BEA is famously incapable of accurately monitoring a dynamically weakening economy in "real time." They may eventually get it right, but only several years after the fact. For example, consider the BEA's constantly changing numbers for the first quarter of 2008 -- from a very similar +0.6% growth shown in the April 30th, 2008 "real time" preliminary report (which, incidentally, reportedly grew to +1.0% over the next two months -- and astonishingly remained at that level through the first of the annual July revisions in 2008) to an admittedly disastrous -2.7% contraction after further consideration and massive subsequent revisions (some 64 months later) :

We are not suggesting that the fourth quarter of 2015 was as bad as the first quarter of 2008. We are merely pointing out that the economy was likely in a dynamic transition towards lower (and potentially negative) growth -- and that we may not know exactly what the actual 4Q-2015 growth rate was for some time to come.

Consumer Metrics InstituteTM
Home of Daily Consumer Leading Indicators

http://www.consumerindexes.com

© 2015 Copyright Consumer Metrics Institute - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules