Q4 GDP weak but not recessionary

Q4 real GDP growth certainly came in weak (0.6% annualized), but still wasn't indicative of a recession. The big caveat is that this is the "advance" report and subject to significant revision in each of the next two months, notably as the projected estimates for December solidify.

The calculation of that 0.6% included a positive 1.37% contribution from consumer spending (personal consumption expenditures) balanced by a negative -1.18% decline in residential investment.

Nominal GDP growth (annualized) came in at 3.2%.

Inflation consumed 2.6% of that (3.2% minus 2.6% equals 0.6%.)

Interestingly, growth in Q4 was in fact at the same rate as in Q1.

Ultimately, this report is far less interesting that the Personal Income and Outlays report next week which will give us a read on consumer spending in December. The upcoming ISM Manufacturing and Non-Manufacturing reports will give us a read on January. Note that the ISM Manufacturing index would have to come in at 41.9 or below to indicate that the overall economy was contracting (recession.) As the ISM puts it, "A PMI in excess of 41.9 percent, over a period of time, generally indicates an expansion of the overall economy." The PMI was 47.7 in December.

-- Jack Krupansky