Fourth Quarter GDP should Surprise to the Upside
Same Quarter Growth should drag up Headline Quarter to Quarter Growth
There are three Gross Domestic Product (GDP) number that will get attention this month: The Headline Annualized, quarter to quarter, GDP, the End of the year GDP, or annual GDP, and the ignored same quarter GDP Growth. Supposedly we have only had one quarter with annualized GDP growth over 3% this year. It is highly unlikely that we will report an end of year growth rate over 3.0% this year. The Schumer Shutdown at the beginning of the year threw a monkey wrench into the calculations. The quarter to quarter GDP has been growing at or over 2.0% for 11 of the past 12 quarters. What can we expect? Same quarter growth was accelerating and over 3.5% until the annual revisions of the GDP data shifted growth from the Trump Administration back to the Obama Administration this Summer. Same quarter GDP has been over 2.0% since the fourth quarter of 2016.
There are four main components to the GDP. The four main components are t. What can we expect this quarter?he Personal Consumption Expenditures (PCE,) Gross Private Domestic Investments (GPDI,) Government Consumption Expenditures (GCE) and the Import Export data. Sometimes we are firing on all four cylinders and sometime PCE is the cylinder that is firing. Common thinking is that PCE drive 60-70% of GDP. This could be very true during fourth quarter.
Seasonally Adjusted Retail Sales Jumped 4.11% from last year's fourth quarter level. The quarter to quarter growth, even though we had record setting non-seasonally adjusted MARTS sales data for October, November and December, the quarter to quarter growth was just 0.54%. Multiple 0.54% by four and you get 2.16% The same quarter growth should pull up the quarter to quarter value for GDP, especially considering the nearly $600 billion non-seasonally adjusted retail sales number for December.
Gross Private Domestic Investments have been revised upward during the past two reporting periods. There were some in the Legacy Media proclaiming end of the expansion talk because quarter to quarter growth had been negative the past two quarters (-6.3% Q2 and -1.t0% Q4) while forgetting that the same quarter values were 3.9% and 0.4%, respectively. They also ignored the same quarter GPDI recession during the first three quarters of 2016. Fourth Quarter GPDI grew at 9.3% during 2016, 4.7% during 2017, and 3.0% last year. Expect a spike due to New Home Construction, and new commercial construction. New home sales have spiked 8.55% quarter to quarter and rocketed 22.39% Q4 to Q4 (Non-seasonally adjusted.)
Government Consumption Expenditures have risen three of the past four years, quarter to quarter. The only quarter than declined was fourth quarter 2018 when we had the Schumer Shutdown. We have seen same quarter GCE growth during the fourth quarter of 2016, 2016, 2017, and 2018. Fourth quarter growth, quarter to quarter, have been 1.1%, 1.1%, 2.4% and -0.4%. Expect at least 2% growth this year. Same quarter growth has been reported at 2.3%, 1.5%, 0.8% and 1.5%. Expect a number between 1.5% and 2.5%.
Fourth Quarter Imports declined quarter to quarter during 2015 and 2016, grew during 2017 and 2018. There are some who will say that tariffs will bring down our imports. Tariffs, in theory, could raise the cost of imports, bolstering the Imports data, and energy exports could bolster our exports. Q2Q data for exports were -1.6% 2015Q4 and -2.5% 2016Q4 and 10.1% 2017Q4 and 1.5% 2018Q4. Same quarter imports were 3.2%, 3.4%, 5.1% and 3.2% respectively.
Fourth Quarter Exports are up the past two years, quarter to quarter, and up three of the past four quarters, same quarter. We do not have all of the import and export data. Expect a positive effect.
Watch the revisions. This is the Advance Fourth Quarter GDP. The Last GDP value we had was the "Final" Third Quarter GDP. It is possible that more data will have been received regarding the third quarter. If that quarter to quarter data is upwardly revised it will borrow growth from the fourth quarter. Last year, at this time, we were building momentum. The July 2019 revisions, as did the July 2018 revisions, shifted growth back from the Trump Administration to the Obama Administration. The 2018 revisions revised the data back to 1929. They must have received new data on computer sales and automobile exports. (Sarcasm.)
Last year we had an anemic 1.1% annualized GDP. Originally the annualized rate was 2.6%. This was after a second quarter with an annualized rate over 4% and a third quarter over 3%. Expect the annualized and same quarter GDP to bounce up to in excess of 2.5%. It is doubtful that we will hit the 2.9% end of year GDP that we had last year. It is likely that the end of year GDP may also be 2.5%. Strength in new construction and retail sales may be reflected in the annualized GDP so a 3.0% headline value for GDP is still possible.
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