BEA Leaves Fourth Quarter 2019 GDP Growth Unchanged At 2.09%

In their second estimate of the US GDP for the fourth quarter of 2019, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.09% annual rate, up 0.01 percentage points (pp) from their previous estimate and unchanged from the prior quarter.

There were no material changes reflected in this report. The revisions recorded can be regarded as statistical noise. Even the one minor reduction in reported consumer spending on goods was offset by an upward revision to inventories.

Annualized household disposable income was revised -$80 lower than in the previous report, and the household savings rate was reported to be 7.7%, unchanged from the previous report.

For this estimate the BEA assumed an effective annualized deflator of 1.35%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was higher at 2.92%. Under estimating inflation results in optimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been 0.55%.

Among the notable items in the report :

-- Consumer spending for goods was reported to be growing at a 0.14% rate, down -0.12pp from the previous estimate and down -0.95pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be 1.03%, up 0.09pp from the previous report and up 0.01pp from the prior quarter. The combined consumer contribution to the headline number was 1.17%, down -0.03pp from the previous report.

-- The headline contribution for commercial/private fixed investments was revised to -0.09%, down -0.10pp from the previous report and up 0.05pp from the prior quarter.

-- Inventories subtracted -0.98% from the headline number, up 0.11pp from the previous report and down -0.95pp from the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.

-- The contribution to the headline from governmental spending was revised to 0.46%, down -0.01pp from the previous report and up 0.16pp from the prior quarter.

-- The contribution from exports was revised to 0.24%, up 0.07pp from the previous report and up 0.13pp from the prior quarter.

-- Imports added 1.29% annualized 'growth' to the headline number, down -0.03pp from the previous report and up 1.55pp from the prior quarter. Foreign trade contributed a net 1.53pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was revised to 3.07%, down -0.10pp from the previous report and up 0.95pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).

-- As mentioned above, real per-capita annualized disposable income was revised -$80 lower than in the previous estimate. The annualized household savings rate was 7.7% (unchanged from the previous report). In the 46 quarters since 2Q-2008, the cumulative annualized growth rate for real per-capita disposable income has been 1.48%.

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