GDP Revision

This morning the BEA released its second estimate of fourth quarter GDP. The estimate for GDP growth was revised up substantially, but the level was still very low, and the upward revision was no more than most observers had hoped for. Comparing to the BEA’s first estimate:

The preliminary estimate of the fourth-quarter increase in real GDP is 0.5 percentage point, or $14.1 billion, higher than the advance estimate issued last month. The upward revision to the percentage change in real GDP primarily reflected upward revisions to exports, to federal government spending, to equipment and software, and to change in private inventories that were partly offset by an upward revision to imports.

The estimate of nominal GDP growth went from 4.2% to 5.0%, while the estimate of inflation went from 3.3% to 3.6%.

Most forecasters are suggesting that the US will enjoy much stronger growth during the first quarter of 2006 (most estimates are in the neighborhood of 4.0-4.5% growth), though I’m skeptical that growth will be that strong this quarter, not to mention later this year. We’ll know who’s right at the end of April.

Kash

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