4Q2022 Gross Domestic Product: Second Estimate

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In its second estimate of 4Q2022 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) revised the growth of the U.S. economy to a seasonally adjusted and annualized rate (SAAR) of +2.68% (+2.9% expected), down 0.21 percentage point (PP) from the “advance” estimate (“4Qv1”) and -0.57PP from 3Q2022.

As with 4Qv1, all four groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI), net exports (NetX), and government consumption expenditures (GCE) -- contributed positively to the headline. This report reflected a sharp downward revision to consumer spending (both goods and services) that was partly offset by an upward revision to business investment. Also contributing to the lower headline number, the 4Q GDP price index was revised higher -- to +3.93% (from 4Qv1’s +3.5%).

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As for details (all relative to 4Qv1):

PCE. Consumer spending was revised down by $25.4 billion (chained-2012 dollars), with spending on goods (-$23.3B) -- primarily spread among recreation goods and vehicles (-$5.1B), motor vehicles and parts (-$4.8B), and other nondurable goods (-$4.1B) -- leading the way. Spending on services underwent a smaller revision (-$4.7B), in which a $12.3B jump in health care spending was more than offset by other line items (especially a $9.7B revision to nonprofit institutions serving households).

PDI. Fixed investment was revised up (+$19.6B), led by nonresidential structures (+$8.6B) and intellectual property products (+$6.4B); residential investment contributed a relatively paltry +$1.7B. Private inventories were also boosted by $6.4B.

NetX. Downward revisions to goods exports (-$2.3B) combined with upward revisions to imported goods (+$1.0B) and services (+$2.4B) to push net exports lower.

GCE. Federal defense (-$0.4B) and nondefense (-$0.5B) expenditures dominated this category.

The BEA’s real final sales of domestic product -- which ignores inventories -- was revised to +1.21% (-0.22PP from 4Qv1), a level 3.23PP below the 3Q estimate. 

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“Although the U.S. economy is still growing, it is losing steam,” said the Economist Intelligence Unit’s Cailin Birch.

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.