Dollars and Jens
Wednesday, January 30, 2008
GDP was only up at a 0.6% rate in Q4; domestic consumption wasn't all that weak, but production was weaker, and inventories sold off. A small boost from net exports, but not as much as the previous quarter; fixed residential investment continues to be a substantial direct drag — we have yet even to reach the inflection point here — and of course is probably an indirect drag as well.

Let's break it into its components:
.6% 3.8% 4.9% .6%
PCE 2.56
Inventories-.65 .22 .89 -1.25
Fixed investment-.70.49 -.11 -.39
Net Exports-.511.32 1.38 .41
Government Spending-.09 .79 .74 .50
"Inventory accumulation" is classically lumped in with fixed investment as "investment", but I find fixed investment tends to be less volatile and inventory adjustment's impact is, on a short term basis, negatively correlated with consumption, and negatively serially correlated with itself; in short, looking at trends, I like to throw about half of it away and put the rest with consumption. Anyway, you can see the big change from the stronger growth earlier in the year is from inventory accumulation; meanwhile, domestic consumption started to drop off a bit, and net exports didn't help nearly as much as they had been.

Tomorrow is NIPA, and the Dallas Fed's trimmed-mean PCE; Friday is the employment report.

Update: "PCE" in the table is actual Personal Consumption Expenditures; the figure I'm awaiting from the Dallas Fed tomorrow is the price deflator on PCE.

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