WASHINGTON — Fourth quarter GDP growth was revised higher to a 2.9% annual rate from the 2.5% pace in the second estimate, a larger upward revision than expected, data released Wednesday by the Bureau of Economic Analysis showed.
Upward revisions to PCE and inventories growth were the key factors, supplemented by smaller upward revisions to nonresidential fixed investment growth and government spending growth. There was some offset by a downward revision to residential fixed investment and a marginally wider net export gap.
The price measures were generally unrevised, so the market reaction to the upward revision to fourth quarter growth is likely to be muted. Analysts have turned their attention to the first quarter, when growth is expected to follow its usual seasonal pattern of slowing, followed by a rebound in the second quarter. Stronger PCE growth in the fourth quarter than previously estimated may give a jump start to first quarter consumption, so there is an upside risk.
Even with the larger-than-expected upward revision to headline GDP, the data suggest little change in the overall growth picture, with the mix resulting a small upward adjustment to final sales.
Gross domestic income, an alternative measure of growth, actually rose only 0.9% in fourth quarter after a 2.4% gain in third quarter. As a result, the GDI/GDP average slipped to a 1.9% pace after a 2.8% gain in the previous quarter.
Inventory investment was revised up to a $15.6 gain for the quarter from $8.0 billion in the second estimate. The net export gap now stands at $653.9 billion, modestly wider than $652.2 billion gap in the second estimate.
Within consumption, which was revised up to a 4.0% increase from 3.8% in the second estimate, there were upward revisions to nondurables and services spending, partially offset by a downward adjustment to durables spending.
The personal savings rate was revised down to 2.6% from 2.7% in the second estimate, down sharply from 3.4% in 3Q.
Nonresidential fixed investment was revised higher to a 6.8% pace from the 6.6% gain in the second estimate, with a sharp upward adjustment to structures investment more than offsetting a downward revisions to spending on equipment and intellectual property.
Residential fixed investment was revised down modestly to a still-strong 12.8% rate from the 13.0% gain reported in the second estimate.
Government spending was revised up slightly to a 3.0% gain, compared with a 2.9% rise in the second estimate.
As a result of the mix of revisions, real final sales of domestic product were revised up to a 3.4% gain from the 3.3% increase in the second estimate. Real final sales to domestic purchasers was revised up to a 4.5% pace from 4.3% in the second estimate.
The key price measures were generally unrevised in the third estimate for the quarter. The chain price index was unrevised at a 2.3% gain, the gross domestic purchases price index was unrevised at 2.5%, both up from the previous quarter.
The closely watched core PCE price index was unrevised at a 1.9% gain, up from 1.3% in the third quarter. The year/year rate for the measure remained at 1.5%, still slightly ahead of the 1.4% rise in the third quarter.
