Revised 4Q GDP Data Fuels Recession Concerns

The US economy grew at a 2.2 percent annual pace in the fourth quarter of 2018, the Department of Commerce, Bureau of Economic Analysis reported Thursday in a revised estimate of Gross Domestic Product (GDP). The figure was revised down from the previously estimated growth rate of 2.6 percent. It also is significantly lower than the strong growth the economy enjoyed earlier in 2018 and suggests that commerce is beginning to slow in 2019.

The revised data revealed that there were numerous downward adjustments to previous growth estimates of GDP components, including consumer spending (+2.8 percent previous estimate; +2.5 percent revised estimate), business investment (+6.2 percent previous; +5.4 percent revised), residential construction (-3.5 percent previous; -3.9 percent revised), and government spending (+0.4 percent previous; -0.4 percent revised).

Contributions to growth of real GDP came from gains in personal consumption expenditures (PCE) (+1.7 percent), business investment (+0.7 percent), and inventory accumulation (+0.1 percent). Residential construction reduced growth by 0.2 percent, as did trade (-0.1 percent) and government spending (-0.1 percent).

PCE inflation, the Fed's preferred inflation metric, decreased from 1.6 percent in the third quarter to 1.5 percent in the fourth quarter. However, core PCE inflation (excluding food and energy) accelerated from 1.6 percent to 1.8 percent over that time.

Real gross domestic income (GDI) growth – an alternative measure often compared to GDP growth – slowed from 4.6 percent in the third quarter to 1.7 percent in the fourth. For the year, GDI growth was slightly weaker than GDP growth (2.8 percent versus 3 percent). Corporate profits fell by 1.7 percent in the fourth quarter but were 11.1 percent higher than the same quarter a year earlier.