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Revised GDP Report Shows Growth, Reverses Advance Estimates

Real gross domestic product (GDP) grew 0.1 percent in the fourth quarter, the ""Bureau of Economic Analysis"":http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp4q12_2nd.pdf (BEA) reported Thursday.


""Last month"":https://themreport.com/articles/gdp-falls-in-4q-first-drop-since-recession-ended-2013-01-30, in the advance GDP release, BEA had reported the nation's economy contracted by 0.1 percent, the first ""negative growth"" since the end of the Great Recession in mid-2009. Economists had expected the turnaround, but to a stronger 0.5 percent growth rate.

BEA, in reporting the revision in GDP, said it was based on more complete source data than were available for the ""advance"" estimate issued last month.

""The upward revision to the percent change in real GDP is smaller than the average revision from the advance to second estimate of 0.5 percentage point,"" BEA said. ""While today's release has revised the direction of change in real GDP, the general picture of the economy for the fourth quarter remains largely the same as what was presented last month.""

Net exports, a subtraction from GDP, were less negative than in the initial report. However, inventory growth was revised down notably. Government purchases also were reduced in the revision. The drop in government purchases followed a third quarter spike to spend before the end of the government's fiscal year at the end of the third quarter.

Headline inflation for the GDP price index showed a 0.9 percent annualized inflation rate compared with the initial estimate of 0.6 percent and 2.7 percent in the third quarter. Excluding food and energy, inflation was revised to 1.2 percent, compared the advance estimate of 1.1 percent and 1.3 percent in the third quarter.

Just as timing affected the third quarter government spending, inventory investment was held back--and even more than originally believed, likely due to hesitation by businesses about fiscal cliff issues. That would suggest an inventory rebuild in the first half, adding to growth. At the same time, weaker retail sales forecasts as a result of the end of the payroll tax holiday could cut into inventory investment.


The increase in real GDP in the fourth quarter came from positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment that were partly offset by negative contributions from private inventory investment, federal government spending, exports, and state and local government spending.

Downturns in private inventory investment, in federal government spending, in exports, and in state and local government spending were drags on GDP, partly offset by an upturn in nonresidential fixed investment, a larger decrease in imports, and an acceleration in PCE.

Real personal consumption expenditures increased 2.1 percent in the fourth quarter, down from the originally reported growth of 2.2 percent compared with an increase of 1.6 percent in the third.

Real nonresidential fixed investment increased 9.7 percent in the fourth quarter, in contrast to a decrease of 1.8 percent in the third.

Nonresidential structures increased 5.8 percent; it was unchanged in the third quarter. Equipment and software increased 11.3 percent in the fourth quarter, in contrast to a decrease of 2.6 percent in the third.

Real residential fixed investment increased 17.5 percent in the revised fourth quarter report, compared an increase of 15.3 percent in the first report and an increase of 13.5 percent in the third quarter.

By the numbers, GDP grew $4.3 billion in the fourth quarter to $13.66 trillion. Personal consumption grew $49.9 billion and accounted for 70.8% of total GDP, up slightly from 70.5 percent in the third quarter.

Residential fixed investment in the fourth quarter, initially reported at $384.3 billion, was revised up to $386.1. It had been $370.9 in the third quarter. Residential fixed investment represented 2.8 percent of total GDP in the fourth quarter, up from 2.7 percent in the third quarter.

With the revisions, government spending dropped $44.2 billion in the fourth quarter, more than the first-reported $41.5 billion. Federal spending fell $40.9 billion, net of a drop of $42.1 billion in defense spending from the third quarter.

At the same time, though, state and local spending dropped $4.7 billion compared with the $2.5 billion decline in the first report.

Government spending represented 18.0 percent of GDP in the fourth quarter, down from 18.3 percent in the third.

_Hear Mark Lieberman Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:40 a.m. and again at 9:40 a.m. EST._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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