Dashing off to work, and will update later, but real GDP grew 3.2% percent in the fourth quarter (annualized quarterly rate). That’s a slower pace than the previous quarter’s 4.1%, but it’s in line with expectations, consumer spending was strong (largest gain in three years), and while inventory build-ups pulled back from their spike in the previous quarter, they still contributed about 0.4% to growth.
Austerity and the government shutdown can be seen in the data as a significant drag on growth. Federal spending contracted at an almost 13% annualized pace in the quarter and robbed a full percent from Q4 growth.
One worrisome number from the report was a break in the positive trend of “residential fixed investment”–spending on homes–as a contributor to overall growth. For the first time in three years, that component posted a negative, shaving 0.3% off of the growth rate. While this is consistent with some signs of a slowing housing market, I suspect it will reverse, either in revisions or future quarters.
With that caveat, the figure below, which shows year-over-year growth per quarter–a good way to smooth out some of the noise in the annualized quarterly numbers–shows a very clear pattern of acceleration over the year. On average for the year, real growth was only 1.9%, not enough to generate the job and earnings opportunities that the vast majority of households still lack, and almost a full point below 2012’s average rate of 2.8%. That’s a clear result of the damage from all that 2013 fiscal drag.
But when we look at the progress per quarter, as opposed to averaging over the whole year, the staircase acceleration pattern is clear. We need faster growth than the 2.7% we ended up with at the end of last year, but the bars are moving in the right direction.
More to come…