After the blistering final Q3 GDP print of 4.1% (to be revised far lower eventually), the preliminary Q4 GDP number had only one way to go, down – and sure enough it dropped to the expected 3.2% (well below Joe LaVorgna’s 4.0% forecast), capping 2013 GDPat 1.9%, down solidly from the 2.8% growth recorded in 2012. “Assume a recovery…”
The good news: the composition of the preliminary Q4 GDP number was better, with inventories only accounting for 0.42% of the final 3.22% print, compared to 1.67% previously. In fact, for the first time since Q1, Personal Consumption was responsible for more than half of GDP growth, generating 2.26% of the annualized growth compared to 1.36% in Q3.Still on a quarterly basis, Personal Consumption of 3.3% missed expectations of a 3.7% growth, up from 2.0% – did the consumption surge already roll over before the quarter ended? Why yes, if one looks at abysmal holiday retail sales numbers.
The key contributors to consumption growth were Services, and specifically a jump in spending on housing and utilities (from -0.31% to 0.14%), as well as Food Services and Accommodations which rose from 0.02% to 0.43% annualized. Which was to be expected as inventory is being absorbed by consumption. The question is how much longer can consumers keep this behavior up with collapsing purchasing power.
The bad news, and here all “CapEx is growing” fans please look away, Fixed Investment tumbled from 0.89% to just 0.14% annualized, as investment across the board dipped but mostly in non-residential structures (down -0.03% from 0.35%) and a collapse in residential fixed investment from 0.31% to -0.32%.
Finally, net trade contributed a whopping 1.33% in GDP, the most since the 2.39% increase in Q2 2009. How much longer can the US continue boosting its GDP on the back of the shale boom, and declining imports, remains to be seen. However, just like the inventory build up now has to be soaked up, so the net trade boost is about to become a drag on growth, precisely in time for the consumer to also pull back. In other words, enjoy the Q4 GDP surge – it won’t last into 2014.