Biden Administration Reports Strong Q4 GDP Growth of 3.4%

Biden Administration Reports Strong Q4 GDP Growth of 3.4% 

It's old news now, but just a while back, the Biden administration's Bureau of Economic Analysis released its third estimate of the US's economic growth in the fourth quarter (Q4), stating that it stood at 3.4% (precisely 3.440%). This figure surpassed both the 3.2% reported last month and the initial 3.2% estimate.

The increase in Q4 GDP primarily stemmed from rises in consumer spending and state and local government expenditure, which were somewhat offset by a decrease in inventory investment. Additionally, imports, which are deducted in the GDP calculation, saw an increase.

Compared to the second estimate, this update showed upward revisions in consumer spending, business investment, and state and local government spending. However, there were downward revisions in inventory investment and exports, with imports being revised downward as well.

Breaking down the contributions to the GDP growth of 3.4%, personal consumption made up 2.20%, an increase from the previous estimate. Fixed investment added 0.67%, also showing improvement. Conversely, changes in private inventories subtracted 0.47%, while net exports remained relatively stable. Government consumption increased modestly to 0.79%.

Personal spending saw the most significant contribution to GDP growth, driven by increases in both services and goods. Major contributors within services included healthcare and professional services, while nondurable goods and recreational goods led the increase in goods.

Further analysis by the Bureau of Labor Statistics (BLS) highlighted that private goods-producing industries, private services-producing industries, and the government all contributed to the GDP increase. Notably, within private goods-producing industries, petroleum and coal products, machinery, and construction were significant contributors.

Regarding prices, GDP prices rose 1.9% in Q4, while PCE prices increased 1.8%. Excluding food and energy, prices increased 2.1% and 2.0%, respectively. These figures are less relevant now, especially with the latest monthly PCE data available.

Lastly, corporate profits increased by 4.1% in Q4 compared to the previous quarter, with profits from domestic nonfinancial corporations showing a significant increase. Profits from domestic financial corporations also saw a modest increase, while profits from the rest of the world experienced a slight decline.