Friday, February 28, 2014

Fourth Quarter Growth Revised Down

Real GDP growth for the fourth quarter was revised down to 2.4% in the BEA’s second estimate. Growth was revised down from an initial estimate of 3.2%. The downward revision was due to declines in categories across the board, aside from fixed investment. Growth in the fourth quarter dropped substantially from the 4.1% growth in the third quarter.

The drop from the third quarter was expected due to the government shutdown, unusually high inventory accumulation the previous quarter, and harsh winter weather. In comparison to the third quarter however, consumption growth is still stronger than in the third quarter. Inventories grew at a slower pace than the 0.6% the quarter prior.

Consumption was revised to 1.7% from an original estimate of 2.3% in the fourth quarter. Inventories grew 0.1%, a slower growth rate than the original estimate. The government drag increased to 1.1%, with the bulk of the drag coming from the federal government. State and local governments only contributed to less than 0.1% of the drag. Fixed investment was the only category that saw growth in the fourth quarter. Residential investment declined at a slower pace and non-residential investment grew both from the initial estimate at the previous quarter.

Current Federal Reserve Chairman Janet Yellen contributed the sluggish economic data to the unusually cold winter and high frequency of storms. She said at a U.S. Senate Banking Committee hearing yesterday that, “I think it’s clear that unseasonably cold weather has played some role in much of that.” The weather could also impact the first quarter data in 2014.

Read the BEA release.

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