GDP Growth in the Fourth Quarter – Second Estimate

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The Bureau of Economic Analysis (BEA) released its second estimate of real GDP growth for the fourth quarter of 2014. Growth in economic output was revised downward to a seasonally adjusted annual rate of 2.2% from an “advance” estimate of 2.6%. The second estimate is based on more complete information than was available for the initial estimate. The slower pace of growth reflects less inventory investment but more fixed nonresidential investment. Imports (which subtract from GDP growth) and spending by state and local governments were also revised upward. GDP grew at an annual rate of 5.0% in the third quarter and 4.6% in the second quarter.

Accelerating personal consumption and slower but robust investment spending contributed the most to growth. Accelerating imports outpaced exports to shave 1.15 percentage points from growth. A sharp reduction in defense spending shaved another 0.58 points from growth.

The combination of more fixed and less inventory investment points to momentum for growth going forward. Fixed investment reflects underlying demand while less inventory investment means less drag in future quarters. Strong personal income growth and less retrenchment in defense spending will also contribute to future growth. We expect GDP growth to accelerate in 2015 coming in above 3% for the year for the first time since the recession ended in 2009.

News source provided by: http://eyeonhousing.org/2015/02/gdp-growth-in-the-fourth-quarter-second-estimate-2/