US GDP Numbers: What Do They Mean?
United States fourth-quarter GDP rose 1.9 percent, noticeably less than economists had forecast, according to Bloomberg. For the full year, growth averaged 1.9 percent in 2016 on par with last year’s expansion.
Following a disappointing first half of 2016, domestic growth picked up momentum June to September. The improvement over the summer months, however, proved short-lived as growth declined once again heading into the final quarter of year. Supplemented in good part by a sizable rebuilding of inventories, investment appears to have gained some ground particularly in terms of intellectual property and equipment spending, a more positive theme that could continue to carry forward especially amid a pro-growth agenda out of Washington.
Residential investment was a surprising support to topline activity after two quarters of negative contribution. Going forward, however, the real estate market will likely continue to struggle to post positive gains amid even a minimally rising rate environment without noticeable improvement in incomes. After all, the consumer remains under pressure, still maintaining a positive but very moderate consumption level.
Durable goods orders fell 0.4 percent in December, the second consecutive month of decline following a 4.8-percent drop the month prior. Year-over-year, headline orders are down 0.8 percent.
Headline orders remain in negative territory, however, business investment appears to be gaining footing, which could be a positive indication for 2017, if said growth can be maintained.
Businesses at this point are reportedly optimistic with a series of pro-growth proposals from the Trump administration focused on reducing the cost and regulatory burden on consumers and businesses. The more recent agenda, however, of the White House on stricter trade agreements and potentially introducing large tariffs or taxes on exports into the U.S. could more than offset the gains from other areas of tax and regulatory relief.
Lindsey M. Piegza, Ph.D., is chief economist at Stifel Economics.
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