US GDP growth disappointed in Q4 rising only 2.8% vs. consensus of 3.0%. More disappointing were the details showing only 2.0% growth in private consumption and inventories adding almost two percentage points.
Main drags come from government consumption and net exports. Fixed investment also slowed, but this was less of a surprise following weak capital goods orders.
Looking ahead we expect continued growth around 2.5-3%. In 2013 we should see a recovery in exports and consumption growth around 2.5% as real incomes are growing around 3%. Inventories will not contribute in Q1, but we expect a smaller drag from the government sector in Q1 as this was extraordinarily weak in Q4.
With this report we are moving closer to QE3. The Fed has clearly become more dovish following a change in composition of voting rights and is already having an easing bias.
Details
Private consumption rose only 2.0% in Q4 from 1.7% in Q3. This was disappointing given the tailwind from lower gasoline prices, but nominal spending growth slowed in Q4 and hence only left room for a muted rise in private consumption.Other negatives in the report came from government spending, which fell 4.6% q/q and subtracted 0.9 percentage points from growth. Net exports were also weak as export growth continued at a slow rate of 4.7% and import growth was surprisingly strong rising to 4.4% from 1.2% in Q3. Net exports thus contributed -0.1 percentage points after a positive contribution of 0.4 percentage points in Q3.
That GDP growth was not weaker was due to a strong positive contribution from inventories of 1.9 percentage points following a drag in Q3 of 1.4 percentage points.
Residential construction was the only positive factor rising 10.9% in Q4 from 1.3% in Q3. Investment in equipment and software growth slowed to 5.2% from 16.2%, but this was no surprise after quite soft capital goods orders, which had actually indicated a sharper drop.
