Instant Analysis: Advance GDP estimate for Q4 2015
The Bureau of Economic Analysis released its initial estimate on Q4 2015 GDP this morning, coming in at +0.7% SAAR. This was just slightly below my estimate for +0.8% growth.
The composition of U.S. growth in the fourth quarter was as mixed as we thought. We find relative strength and resilience in real consumer spending (+2.2% SAAR), residential investment (+8.1%), and government spending (+0.7%).
These gains were mostly offset by big drops in business investment: structures (-5.3%) and equipment (-2.5%); exports (-2.5%); and a large slowdown in inventory gains that subtracted $22 billion, or 0.45% from Q4 GDP alone.
In short, few surprises, but not a lot to cheer about, either. A similar pattern will likely be visible in the Q1 2016 release as well: relative strength in consumer spending, housing, and government spending, with continuing weakness in exports and business investment. The big difference could be inventories that are unlikely to be trimmed as aggressively this quarter.
We continue to forecast 2.3% real GDP in Q1 2016, in anticipation of some acceleration in real consumer spending and government spending. However, it’s important to note there is probably more downside risk than upside risk to this forecast right now. We see downside risks from real export growth that could continue to disappoint on slowing global demand, and the temporary impact of the January winter storms on the East Coast, which in past years have interrupted quarterly real GDP gains.
Real U.S. GDP growth for 2015: +2.4% year-on-year. My forecast for 2016 real GDP growth: +2.1% year-on-year.