First Look at GDP Growth in the Fourth Quarter

The Bureau of Economic Analysis (BEA) released the “advance” estimate of real GDP growth for the fourth quarter of 2016. Real GDP grew at a 1.9% seasonally adjusted annual rate, slowing from 3.5% in the third quarter. The BEA emphasizes that the first estimates of quarterly GDP are based on data that are incomplete and/or subject to revision, and subsequent revisions in the following two months will be based on more complete information.

As expected, a retreat from elevated third quarter export levels contributed significantly (-0.53 percentage point) to the deceleration in GDP growth, but a strong rebound in imports accounted for the largest drag on growth (1.17 percentage points). Fixed nonresidential investment, via rebounds in equipment and intellectual property spending, increased its contribution to growth, despite slowing nonresidential structures spending (outside the energy sector). Fixed residential investment accelerated, contributing positively to growth, after a choppy pattern in housing starts earlier in the year.

Inventory investment contributed to growth, returning to sustainable levels, after six quarters of correction. And government spending was mixed, with federal spending slowing while spending at the state and local level accelerated, after earlier declines.

Solid contributions from personal consumption expenditures, rebounding business investment, and steady growth in residential fixed investment are poised to keep GDP growth on a stable and sustainable path going forward. Net exports, influenced by the value of the dollar, and government spending in a new administration are likely to be the forces that will drive GDP growth higher or lower in the coming quarters.


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