4Q2023 Gross Domestic Product: First (“Advance”) Estimate

Click image for larger version

The Bureau of Economic Analysis (BEA) pegged its advance (first) estimate of 4Q2023 U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate (SAAR) of +3.28% (+2.0% expected), down 1.59 percentage points (PP) from 3Q2023’s +4.87%.

On a year-over-year (YoY) basis, which should eliminate any residual seasonality distortions present in quarter-over-quarter (QoQ) comparisons, GDP in 4Q2023 was 3.11% higher than in 4Q2022; that growth rate was faster (+0.18PP) than 3Q2023’s +2.93% relative to 3Q2022.

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 4Q percent-change headline.

Click image for larger version

As for details (billions of chained 2017 dollars; all comparisons to 3Q2023) --

PCE (+$108.4B):

* Goods (+$50.8B). Spending on durable goods rose (+$23.2B), led by recreational goods and vehicles (+$20.9B). Growth in spending on nondurable goods was even stronger (+$28.1B), led by other nondurable goods (+$17.5B).

* Services (+$58.7B). Gains were led by health care (+$21.8B) and food services and accommodations (+$19.5B).

PDI (+$21.0B):

* Fixed investment (+17.2B). This increase was broadly distributed among nonresidential structures (+$5.1B), equipment (+$3.0B), and intellectual property products (+$7.3B); residential investment (+$1.9B) was quite modest, while transportation equipment (-$17.6B) showed the largest loss.

* Inventories (+$4.9B). Nonfarm inventories expanded (+$5.6B); farm: -$0.5B.

NetX (+$22.5B):

* Exports (+$38.3B). Goods exports rose by $19.5B; services: +$18.7B.

* Imports (+$15.8B). Goods imports increased by $5.4B; services: +$9.8B. Recall that the net change in imports is inversely related to the change in the GDP headline.

GCE (+31.0B): State and local consumption expenditures (+$11.8B) led this category, followed by state and local gross investment: +$9.6B).

Annualized growth in the BEA’s real final sales of domestic product, which excludes the value of inventories, was +3.21% (down 0.39PP from 3Q).

Click image for larger version

Joe Brusuelas, chief economist at the tax and consulting firm RSM, said he thinks consumer spending may have been even stronger than indicated -- primarily because the report “did not adequately capture” increased holiday splurging on travel and other services. On the other hand, the Chicago Fed's National Activity Index (CFNAI) was negative in December. A CFNAI value of zero has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth; and positive values with above-average growth.

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.