United States: Q4 economic growth revised downward
February 28, 2014
In the fourth quarter, GDP expanded at a seasonally adjusted annualised rate (SAAR) of 2.4%, according to the second estimate released by the Bureau of Economic Analysis (BEA) on 28 February. The print marked a significant downward revision to the 3.2% reading issued in the advance estimate and fell just short of market expectations of 2.5% growth. The revised fourth quarter reading mainly reflected that increases in private consumption, inventory restocking and the export sector were smaller than initially reported.
On the domestic side of the economy, private consumption rose 2.6% (advance estimate: +3.3% quarter-on-quarter SAAR). Non-residential fixed investment rose 7.3% (advance estimate: +3.8% quarter-on-quarter SAAR). Meanwhile, residential fixed investment contracted 8.8% (advance estimate: -9.8% qoq SAAR). Business inventories grew 0.1%, which was below the 0.4% growth originally reported and significantly lower than the 1.7% growth recorded in Q3. Government spending decreased 5.5% in Q4 (advance estimate: -4.9% qoq SAAR).
On the external front, exports were revised downward and imports were revised upward compared to the advance estimate. According to the second estimate, exports rose 9.4% in Q4 (advance estimate: +11.4% qoq SAAR), while imports increased 1.5% (advance estimate: +1.0% qoq SAAR). Consequently, the external sector's net contribution to overall growth was revised from 1.3 percentage points to 1.0 percentage points.
The Federal Reserve expects economic growth to range between 2.8% and 3.2% in 2014 and between 3.2% and 3.4% in 2015. FocusEconomics Consensus Forecast panelists are slightly less optimistic than the Fed and expect GDP to expand 2.8% in 2014, which is up 0.1 percentage points from last month's forecast. For 2015, the panel expects the economy to expand 3.0%.
Author: Carl Kelly, Economist