4th Quarter GDP at 2.6%, Growth Stronger Than Headline

The 2.6 percent headline rate doesn't do justice to fourth-quarter GDP where consumer spending rose a very strong 3.8 percent that reflects a 14.2 percent burst in durable spending. Residential investment, which is another consumer-related component, rose at a very impressive 11.6 percent annualized rate. Turning to business spending, nonresidential fixed investment rose at a 6.8 percent rate which is the fourth straight mid-single digit result. Government purchases, at a 3.0 percent rate, also added to GDP in the quarter.

What pulled down fourth-quarter GDP were net exports, at an annualized deficit of $652.6 billion, and inventories which rose at a slower rate than the third quarter. Looking at final sales to domestic buyers, which excludes inventories and exports, GDP comes in at a robust 4.3 percent.

Prices also showed life in the quarter, with the index at 2.4 percent vs the third quarter's 2.1 percent. This is a standout report led by the consumer that shows the economy accelerated into year-end 2017 with strong momentum going into 2018.

Recent History Of This Indicator:
The first estimate for fourth-quarter GDP is expected to come in at a 2.9 percent annualized rate vs 3.2 percent and 3.1 percent in the prior two quarters. Consumer spending is expected to be the driver in the fourth quarter, seen rising at a consensus gain of 3.6 percent which would compare with 2.2 percent in the third quarter and 3.3 percent in the second quarter. Residential spending is also expected to show strength in the fourth quarter with inventories seen as a negative. The call for the GDP price index is 2.3 percent.