4Q2013 Gross Domestic Product: First (Advance) Estimate

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The Bureau of Economic Analysis (BEA) estimated 4Q2013 growth in real U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate of +3.2 percent. That rate was notably slower than the 4.1 percent posted for 3Q, but in line with expectations of 3.3 percent. Three of the four categories -- personal consumption expenditures (PCE), private domestic investment (PDI) and net exports (NetX) contributed to 4Q growth; government consumption expenditures (GCE) subtracted from growth. Comparisons to 3Q showed (from Global Economic Intersection):

·   changes to the trade balance (exports higher and imports lower) – this makes GDP higher as exports contribute to GDP while imports are subtracted from GDP;

·   inventories declined – and lower inventories make lower GDP;

·   government spending overall was almost a 1 percent headwind to GDP;

·   and consumer spending growth accelerated.

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The Consumer Metrics Institute summarized the GDP report as follows: “At face value a new headline growth rate above 3 percent (and a prior quarter number north of 4 percent) qualifies as healthy economic growth, and continues to place the United States among the fastest growing developed countries. And absent the [partial federal government] shutdown we could have had a second consecutive quarter above 4 percent. The growth rates certainly provide cover for continued tapering [by the Federal Reserve\. And in fact these kinds of growth rates might argue for a return to more historically normal interest rates.”

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.