US 4Q'11 GDP report (snapshot)

The US economy accelerated to 2.8 percent (annualised) in the fourth quarter of 2011, just shy of the 3 percent expected. The miss was mostly due to lower than expected private consumption, which only grew at 2 percent vs. 2.4 percent expected, in part due to higher than Core PCE. The overall GDP deflator, however, came in much below expectations at 0.4 percent (vs. 1.9 pct. exp.).

Overview Q4 in percent, annualised (Q3):

• GDP at 2.8 vs. 3 expected (1.8)
• PCE at 2 vs. 2.4 expected (1.7)
• GDP Price Index at 0.4 vs. 1.9 expected (2.6)
• Core PCE at 1.1 vs. 0.9 expected (2.1)
• Contributions to GDP (percentage points):
  • PCE: 1.45 (1.24)
  • Fixed investment: 0.41 (1.52)
  • Change in inventories: 1.94 (-1.35)
  • Net exports: -0.11 (0.43)
  • Government spending: -0.93 (-0.02)

Overall, GDP was driven by durable goods consumption (+1.07 percentage points), inventories (+1.94), and investment in equipment and software (+0.39) while net exports (-0.11) and government spending (-0.93) subtracted. It is encouraging that the US economy is currently more than capable of withstanding the drag from the public sector, but at the same time inventories will not continue to grow as massively so consumption, investment and exports need to pick up pace even more to weather the headwinds coming in 2012, both domestically and from abroad.

Link to the GDP report.