4Q2012 Gross Domestic Product: First (Advance) Estimate

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The Bureau of Economic Analysis (BEA) estimated 4Q2012 growth in real U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate of -0.1 percent, 3.2 percentage points lower than the current 3Q estimate. Only personal consumption expenditures (PCE) were net positive; government consumption expenditures (GCE) -- especially defense-related purchases, net exports (NetX) and private domestic investment (PDI) subtracted from 4Q growth, in that order.  

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Consumer Metrics Institute (CMI) listed several “take-aways” from the report:

-- As detailed [in the rest of CMI’s report], the contraction was driven primarily by dramatic (but not unexpected) reversals to the one-quarter spikes in government spending and inventory growth, which sharply (and conveniently) improved the headline number just prior to the November election. At best both of those one-quarter binges simply brought zero-sum economic activity forward by a quarter, and at worse we will see both of these surges later treated as data anomalies that disappear in future revisions.

-- For those of us who follow these numbers closely (and perhaps foolishly try to make some longer-term sense of them), the inexplicable economic surge reported for the third quarter has now at least reversed, and the general weakening pattern previously recorded for 2012 seems to have been confirmed.

-- The consumer data was actually a modest bright spot. Per-capita disposable income increased substantially, as did personal consumption expenditures for both goods and services. Similarly commercial fixed investment expenditures improved.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.