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Headline GDP of 3.2% missed analyst estimates but a look under the hood shows a fairly strong report with PCE and final sales posting strong gains .  Final sales were higher by 7.1% – a 26 year high. Personal consumption expenditures increased 4.4 percent and nonresidential fixed investment increased 4.4 percent.  Sharper than expected declines in government spending and inventories were not enough to offset the data.  Econoday has the details:

“Weakness was led by a sharp slowing in inventory investment to $7.2 billion from $121.4 billion in the third quarter. Government purchases slipped 0.6 percent.

The bottom line is that final sales have picked up significantly. Final sales of domestic product strengthened to a 7.1 percent increase from 0.9 percent annualized in the third quarter. Growth in real final sales to domestic purchasers (takes out net exports) picked up to 3.4 percent, following a 2.6 percent boost in the third quarter.

Year-on-year, real GDP in the fourth quarter is up 2.8 percent, compared 3.2 percent in the third quarter.

Economy-wide inflation as measured by the GDP price index softened to 0.3 percent in the fourth quarter, following a 2.1 percent increase the prior quarter. The consensus expected a 1.5 percent gain.

Today’s report is clearly positive for forward momentum in the recovery despite a slightly disappointing headline number. Demand is picking up and inventories are not out of control-a very good combination. Still, growth is moderate and there are no signs of pending excessive growth.”

Source: Econoday

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