US GDP Revision Shows Growth Amidst Rising Debt, Economic Concerns Persist
Moments ago, two significant events unfolded: the Bureau of Economic Analysis, under the Biden administration, released the first revision of the Gross Domestic Product (GDP) for the fourth quarter of 2023. However, this figure holds little relevance now, as it reflects the state of the US economy over two months ago, with the new quarter about to begin. Meanwhile, the value of a particular digital currency surged above $60,000, nearing its previous record high by less than $10,000. Though not immediately apparent, these two occurrences are interconnected. Let's delve into the connection.
The revised GDP data indicates a 3.2% increase for the fourth quarter, slightly lower than the earlier reported 3.3% and below the consensus estimate of 3.3%. This growth primarily stemmed from rises in consumer spending, exports, and state and local government expenditure. Notably, imports, which detract from GDP, also increased.
Consumer spending saw increases in both services and goods, particularly in healthcare, food services, accommodations, and other services like international travel. Goods contributing to this rise included pharmaceutical products and recreational goods. Export growth was driven by both goods, led by petroleum, and services, led by financial services. State and local government spending increased due to rises in both investment, particularly in structures, and consumption expenditure, mainly in employee compensation.
Comparing the initial estimate with the revised one, several noteworthy changes emerged. Personal consumption rose more than anticipated, growing by 3.0% quarter-over-quarter (annualized), contributing 2.0% to the overall GDP, up from 1.91% in the original estimate. Fixed investment and government contributions also increased, offsetting a decline in private inventories.
However, the significance of these figures is limited, as they will likely be revised again next month. By then, market focus will have shifted to future quarters rather than dwelling on past GDP figures.
Upon closer examination of the data, a striking revelation emerges: nominal GDP increased from $27.61 trillion in Q3 to $27.94 trillion in Q4, a $334.5 billion rise in absolute dollar terms. Yet, this growth was largely fueled by debt. Comparing the US Treasury's debt figures from September 30, 2023 ($33,167,334,044,723.16) to December 31, 2023 ($34,001,493,655,565.48), it's evident that the US economy grew by $334.5 billion but required an additional $834.2 billion in debt during Q3. This translates to $2.5 in debt for every $1 in GDP growth.
This cycle underscores the concerning dependence on debt within the economy, indicating a critical point of no return.