WASHINGTON — U.S. Q4 GDP posted a 3.2% increase, not as high as many feared, with about a 0.3 point subtraction estimated to stem from the Federal government shutdown in the first half of October. However, there was also strong underlying demand that suggests back pay restoration and private industry kept the economy humming.
The Commerce Department assumed a lesser inventory build and a wider trade gap for missing December data. These had the effect of dampening the growth gain.
Notable was that personal consumption was up 3.3%, its best gain since Q4:2010. In addition to strong durables sales supported by huge unit sales in autos (contributed 0.44 point to GDP), nondurables and services buying surged. Clothing and food sales jumped, as did financial services and "food services and accommodations."
It is possible that government and contract workers used their time off to vacation and shop. But the gain in the financial component is probably better related to the edging down in market interest rates.
Nevertheless, real final sales at a 2.8% increase was the best pace since Q1:2012 and shows good demand and the ability of the U.S. economy to continue growing. Rising consumption offset a 9.8% dip in residential construction, which might be related to the harsh weather.
The export and private investment sectors contributed to growth. Federal spending at -12.6% cut growth, as did a deceleration in inventory growth. State and local spending was up 0.5%.
GDP prices were up 1.3%, still subdued, and well below policy targets.
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