4th Quarter GDP Revised Higher

Fourth-quarter GDP is revised 4 tenths higher in the third estimate to a 2.9 percent annualized rate that beats Econoday's consensus by 2 tenths. Consumer spending gets a 2 tenth upgrade to a 4.0 percent rate as spending on services is revised 2 tenths higher to 2.3 percent with nondurable spending getting a 5 tenths upgrade to 4.8 percent. Spending on durables is revised 1 tenth lower to a still very strong 13.7 percent that reflected hurricane-replacement for autos and which pulled vehicle sales out of the ongoing quarter. Contribution from consumer spending to the fourth quarter's total growth rate was 2.8 percentage points, almost the entire GDP rate.

Nonresidential fixed investment is upgraded 2 tenths to a very solid 6.8 percent rate and contributing 0.8 points to the quarter that, unlike consumer spending, may be extending that strength into this quarter based on last week's durable goods report. Residential investment, which appears shaky so far this quarter, is revised 2 tenths lower to 12.8 percent for a contribution of 0.5 points. Slowing in inventory growth held down growth slightly less than in the second estimate, at minus 0.5 points, with the drag from net exports revised fractionally higher, now at minus 1.2 percentage points. Government purchases are revised slightly higher to 3.0 percent which contributed 0.5 points to the quarter.

The fourth quarter was very solid and actually understated given the strength of consumer spending. Excluding both inventories and exports, GDP rose 4.5 percent which is also 2 tenths higher than the second estimate. For the ongoing first quarter, consumer spending, or the lack of it, is the question. Watch tomorrow for new GDP inputs with the personal income and outlays report for February.