REAL GDP touch light, NOMINAL GDP very light

After 3 quarters in a row that averaged just 1.2%, Q4 GDP grew 2.8%, a touch below expectations of 3.0% BUT Nominal GDP grew well below forecasts. Because the price deflator was up just .4% vs the estimate of 1.9%, Nominal GDP was up 3.2% vs the estimate of 4.9%. Personal Consumption rose 2.0% vs the forecast of 2.4%. Fixed Investment rose 3.3% helped by a 5.2% increase in equipment and software spending and residential construction rose by 10.9%. Trade was a slight drag on GDP growth and government spending was as well led by a 12.5% decline on national defense spending. State and local government spending fell by 2.6%. Inventories added almost 2 % pts to growth and taking out this influence saw Real Final Sales rise just .8% vs 3.2% in Q3. Thus, inventories were a large swing factor in the Q4 rebound. Bottom line, Real GDP was near estimates but nominal GDP was the weakest since Q3 ’09 and Real Final Sales were the 2nd softest since Q1 ’10. Thus, very mixed is how I would best describe this economic recovery and firm footing we don’t have in the face of a European slowdown and Asian moderation.

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