BEA Revises 4th Quarter 2018 GDP Growth Downward To 2.16%

In their final estimate of the US GDP for the fourth quarter of 2018, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.16% annual rate, down -0.42 percentage points (pp) from their previous estimate and down -1.20pp from the prior quarter. 

The downward revision in the headline number was driven by weaker estimates of the growth in the consumption of consumer goods (down -0.26pp from the previous report), weaker fixed investments (down -0.15pp from the previous report) and governmental spending (down -0.14pp from the previous report). The rest of the revisions were statistical noise, except for an upward +0.11pp revision to imports. 

Household disposable income was reported to be up +$391 per annum on a quarter over quarter basis, and the household savings rate was reported to be 6.8% (up +0.4pp from the prior quarter). 

For this estimate, the BEA assumed an effective annualized deflator of 1.87%. During the same quarter (October 2018 through December 2018) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was materially smaller at 1.14%. Overestimating inflation results in pessimistic growth rates, and if the BEA's "nominal" data was deflated using CPI-U inflation information the headline growth number would have been significantly higher at a +2.93% annualized growth rate. 

Among the notable items in the report 

-- The headline contribution from consumer expenditures for goods was reported to be +0.54%, down -0.26pp from the previous report and down -0.36pp from the prior quarter. 

-- The contribution to the headline from consumer spending on services was reported to be +1.12%, up +0.01pp from the previous report, but down -0.35pp from the prior quarter. The combined consumer contribution to the headline number was reported to be down -0.71pp from the prior quarter, marking the second consecutive quarter of weakening growth in consumer spending. 

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