U.S. Real GDP Contracts 0.1% In Q4; Declines In Business Inventories, Defense Spending Responsible (Charts)

U.S. Real GDP contracted by 0.1% in Q4 2012. Declines in business inventories and federal spending/gross investment (mainly defense spending) caused most of the damage. Here is selected text from the GDP release via bea.gov along with charts from the St. Louis Fed's FRED database.

Q4 Real GDP -0.1% (annual rate) - Source: St. Louis Fed 

Via BEA.gov:

"Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 0.1 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1 percent.

The Bureau emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4 and the "Comparisons of Revisions to GDP" on page 5). The "second" estimate for the fourth quarter, based on more complete data, will be released on February 28, 2013.

The decrease in real GDP in the fourth quarter primarily reflected negative contributions from private inventory investment, federal government spending, and exports that were partly offset by positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased."

Real Change in Private Inventories (Business Inventories) in Billions of Chained 2005 Dollars

Source: St. Louis Fed

Real Federal Consumption Expenditures & Gross Investment - Compounded Annual Rate of Change

Source: St. Louis Fed

National Defense Spending - Compounded Annual Rate of Change

Source: St. Louis Fed

More numbers from the BEA's PDF:

Real personal consumption expenditures increased 2.2 percent in the fourth quarter, compared with an increase of 1.6 percent in the third. Durable goods increased 13.9 percent, compared with an increase of 8.9 percent. Nondurable goods increased 0.4 percent, compared with an increase of 1.2 percent. Services increased 0.9 percent, compared with an increase of 0.6 percent.

Real nonresidential fixed investment increased 8.4 percent in the fourth quarter, in contrast to a decrease of 1.8 percent in the third. Nonresidential structures decreased 1.1 percent; it was unchanged in the third quarter. Equipment and software increased 12.4 percent in the fourth quarter, in contrast to a decrease of 2.6 percent in the third. Real residential fixed investment increased 15.3 percent, compared with an increase of 13.5 percent.

Real exports of goods and services decreased 5.7 percent in the fourth quarter, in contrast to an increase of 1.9 percent in the third. Real imports of goods and services decreased 3.2 percent, compared with a decrease of 0.6 percent.

Real federal government consumption expenditures and gross investment decreased 15.0 percent in the fourth quarter, in contrast to an increase of 9.5 percent in the third. National defense decreased 22.2 percent, in contrast to an increase of 12.9 percent. Nondefense increased 1.4 percent, compared with an increase of 3.0 percent. Real state and local government consumption expenditures and gross investment decreased 0.7 percent, in contrast to an increase of 0.3 percent.

The change in real private inventories subtracted 1.27 percentage points from the fourth quarter change in real GDP after adding 0.73 percentage point to the third-quarter change. Private businesses increased inventories $20.0 billion in the fourth quarter, following increases of $60.3 billion in the third and $41.4 billion in the second.

Real final sales of domestic product -- GDP less change in private inventories -- increased 1.1 percent in the fourth quarter, compared with an increase of 2.4 percent in the third."

Relevant post from September 2012: "Capex Orders Signal Weaker Investment Activity" (UniCredit Chart)

Where is the market headed? Read this post: Byron Wien: Major S&P Sell-Off Coming As Earnings Peak, Fiscal Tightening Gets Realized (CNBC Video, Text).

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