United States: GDP growth revised up in Q4 due to faster accumulation of stockpiles
February 26, 2016
According to revised data released on 26 February, U.S. GDP expanded at a seasonally adjusted annualized rate (SAAR) of 1.0%, which was revised up from the 0.7% increase previously reported. The revision came in against expectations for a downward revision (market expectations: -0.4% SAAR) and was the result of businesses accumulating stockpiles at a faster rate than initially estimated. Nonetheless, Q4’s result still represented a deceleration over the 2.0% increase tallied in Q3 and was the result of slower domestic demand, which was dragged down by slower private consumption and a significant deceleration in fixed investment. On the external front, growth in exports of goods and services deteriorated toward the end of year due to the strengthening of the dollar.
Revised data showed that private consumption increased 2.0% in Q4, which was downwardly revised from a 2.2% expansion in the preliminary estimate (Q3: +3.0% SAAR). Meanwhile, non-residential fixed investment plummeted from a 2.6% increase in Q3 to a revised 1.9% contraction in Q4 (previously reported: -1.8% SAAR). Residential fixed investment expanded a revised 7.9% in Q4, which was weaker than the 8.2% expansion in both the previous quarter and the initial estimate. Revised data also showed that government consumption decreased 0.1% in Q4—revised down from a 0.7% rise—which contrasted the 1.8% expansion tallied in Q3. A large buildup of inventories in Q4 was the main driver behind the revision in Q4’s overall GDP growth, which is a typical powerful variable in revisions.
Meanwhile, the strengthening of the dollar continued to dampen exports of goods and services. U.S. overseas sales of products and services plunged 2.7% in Q4, which was faster than the 2.5% contraction previously reported and marked a notable deterioration over Q3’s reading. On the other side of the balance, imports decreased 0.6% in Q4 (previously reported: -1.1% SAAR), which contrasted the 2.3% increase observed in Q3. According to new data, the contribution from net exports to overall economic growth was minus 0.3 percentage points, which was somewhat better than the 0.5 percentage-point detraction initially reported in the preliminary estimate.
In annual terms, the economy expanded 1.9% in the final quarter of the year, which was below the 2.2% increase tallied in Q3. The economy grew 2.4% in the full year 2015, which matched the growth registered in 2014.
Author: Carl Kelly, Economist