Advance Q4 GDP Shows 2.6% Growth

WASHINGTON — Fourth quarter real gross domestic product posted a 2.6% gain, assuming missing December data will include higher inventories on net and a worsening trade balance.

Real final sales were up 1.8% in a third gain in a row (the 2014 winter weather captured in Q1:14 was severe and displaced some buying). Personal consumption expenditures were up 4.3% in their best gain since Q1:2006, prior to the recession. Spending was broad-based, with only "food away from home" lower.

The expected weakening in nonresidential fixed investment put that category up just 1.9%, after it surged at mid-year. It remains unclear if this simply reflects the oil patch's pricing problems, but equipment spending at a 1.9% decline had its worst showing since a 13% drop in Q1:2009 and was the only declining area. Equipment is probably the first sector to reflect softer capital spending plans during most adjustment periods.

Net exports cut more than a full point from growth. If the December trade data do not deteriorate as expected, this could be a source of upward revision to growth.

GDP prices were flat, and core PCE prices posted just a 1.1% increase. These favorable results probably reflect the effects of lower energy prices being spread around.

Perhaps more telling than quarterly growth changes is that in 2014, GDP was up 2.4%, very close to trend. Stops and surges along the way reflected bad weather and the subsequent rebound. The consumer remained the biggest contributor to growth and appears to be in good shape due to better job prospects and lower oil prices distributing more income to spend on other items.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.
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