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US: Revised GDP data continue to show deceleration - Wells Fargo

Data released today showed that Q4 GDP was revised lower from 2.6% to 2.2%. According to analysts at Wells Fargo, the revised numbers signals the US economy continued to create income at a solid pace. They expect corporate profit growth to slow meaningfully going forward.

Key Quotes: 

“The broad weakness in the retail environment at the end of last year caused consumer spending to increase only 2.5%, down from the initial 2.8% estimate, with the weakness concentrated in goods consumption. Fixed investment also saw smaller increases than initially reported in both the nonresidential and residential omponents of spending. But, a smaller increase in imports resulted in a more modest drag from net exports than previously reported.”

“Today’s GDP release continues to show that the rate of economic growth in the United States has downshifted a bit over the past few quarters. Our current forecast looks for further deceleration in the first quarter, but we then look for a modest rebound starting in Q2.”

“The data also included the first look at economy-wide corporate profits in the fourth quarter. On a pre-tax basis, corporate profits were up 7.4% on a year-ago basis in Q4, down modestly from roughly 10% growth in the third quarter. After tax, profits grew 14.3% (bottom chart). 

“The deceleration in GDP growth this year will weigh on corporate profit growth, while increased labor costs pose a threat to margins. We look for corporate profits to continue to rise this year, albeit at a more moderate pace.”


 

Author

Matías Salord

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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