GDP 2013Q4: Solid Report but Modest Growth For 2013 (Thanks A Lot, Fiscal Drag…)

January 30th, 2014 at 9:01 am

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…



Source: BEA

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5 comments in reply to "GDP 2013Q4: Solid Report but Modest Growth For 2013 (Thanks A Lot, Fiscal Drag…)"

  1. Larry Signor says:

    It’s starting to almost feel like a recovery. The real question is, do we have another economic problem bubbling away?

  2. Tom in MN says:

    RE the fiscal drag: it feels so much better now that we’ve stopped banging our head on the wall — as Prof. K. would say.

    I don’t think you get to call it a recovery when all we’ve done is get back to where we were before the sequester started.

  3. Perplexed says:

    -“…the staircase acceleration pattern is clear.”

    I think there are too many quarters included in my graph to support a “staircase” story (or maybe I just haven’t seen any modern “staircases.”) Maybe there’s something wrong with my computer screen, but this looks a lot more like a “wave” than a “staircase” on my laptop.

    -“On average for the year, real growth was only 1.9%, not enough to generate the job and earnings opportunities.”

    So at this rate, or even at the 2.7% “rose colored glasses” rate, how many years away from “full employment” are we at now? On average, how young do you have to be now to have a better than “average” chance to still see it in your lifetime? How about prior to your 65th birthday? Maybe this will take some pressure off of plutocrats & politicians but its pretty hard to see how a 2.7% rate is much to excited about for the 95%. Its a little like “trickle down economics,” don’t worry about the fact that there’s no help for you now, someday, after the plutocrats get much wealthier than they are now, you’ll really appreciate what they toss your way.

  4. Robert Buttons says:

    The central bank is printing roughly $1T, which accounts roughly for 6% of our GDP. Ergo, rGDP moves in the 4% range register, to me, as insignificant.

  5. Robert Buttons says:

    Good quote as to what’s driving the world economy:

    [Said] Liu Chuanzhi, the Chairman of Lenovo and the iconic figure of Chinese manufacturing. When asked a few years ago why 60% of Lenovo Group’s profit came from asset investment and only 40% came from manufacturing. He said “when the typhoons come, even a pig can fly in the sky. Everybody is profiteering from [central bank liquidity]. Why can’t we?”