4Q2011 Gross Domestic Product: Second (Preliminary) Estimate

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The Bureau of Economic Analysis (BEA) estimated 4Q2011 growth in real U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate of 3.0 percent, up from both the previous estimate of 2.8 percent for 4Q and the final estimate of 1.8 percent in 3Q. Private domestic investment (PDI) – especially private inventories – and personal consumption expenditures (PCE) contributed to 3Q growth in that order, while net exports (NetX) and government consumption expenditures (GCE) exerted “drags.” The changes to 4Q’s estimates were generally of limited statistical significance.
 

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Consumer Metrics Institute (CMI) made the following observations:

-- The contribution to the annualized growth rate for consumer expenditures for goods was revised down slightly to 1.17 percent, which is still up 0.84 percent from the 0.33 percent rate reported for 3Q2011.

-- On the other hand, consumer services were revised modestly upward to 0.35 percent, gaining a quarter of a percent from the 0.10 percent in the "advance" report.

-- The growth rate contribution from private fixed investments was also revised up slightly to 0.53 percent (from 0.41 percent previously), but this remains about 1 percent lower than the 1.52 percent annualized rate reported for 3Q.

-- The contribution from inventories (1.88 percent annualized) is only slightly less than the 1.94 percent reported in the "advance" estimate and it still represents in its own right a +3.23 percent improvement in the headline number compared to 3Q.

-- The reported drag on GDP growth from contracting expenditures by governments at all levels was not meaningfully changed at -0.89 percent (slightly less than the -0.93 percent drag previously reported), remaining -0.87 percent worse than during 3Q2011.

-- The annualized contribution to the growth rate from exports was revised down slightly to 0.59 percent (from 0.64 percent in the "advance" report).

-- Imports are now reported to be removing -0.65 percent from the growth rate of the overall economy, only modestly less than the -0.75 percent previously reported but still a significant deterioration from the -0.21 percent rate reported for the third quarter.

-- The annualized growth rate of "real final sales of domestic product" was revised upward about a third of a percent to 1.10 percent, but it is still substantially below the +3.16 percent reported for 3Q. If this number is accepted at face value (and not as a consequence of deflators playing havoc with inventory valuations) it still indicates a much weaker economy than is conveyed in the headline number.

-- Real per-capita disposable income is now reported to have grown at a miserable 0.59 percent annualized rate during 4Q2011.
 

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The 4Q GDP estimate leaves the recession call made by Federal Reserve analyst Jeremy Nalewaik essentially unchanged. Nalewaik’s analysis correlated the onset of recessions with a fall in the year-over-year change in gross domestic product (GDP) below 2 percent. Since 1947, the U.S. economy either was already or soon would be in recession each time the year-over-year change in GDP fell below 2 percent (the red dashed line in the figure above). The year-over-year GDP change stood at 1.62 percent in 4Q.