Growth Ended 2023 Very Strong, With GDI Impressing

Real GDP was revised up by 0.2pp in the final reading for 4Q23, with quarterly annualized growth of 3.4%. The internals of the revision were broad-based, including a very strong gross domestic income reading.

• Private consumption and fixed investment each contributed an additional 0.2pp versus the previous estimate more than offsetting a bigger drag from inventories, and less of a contribution from net exports.
• The headline PCE price index was unrevised at 1.6%, but more attention was placed on the core PCE inflation reading which was revised down a tick to 2.0% from 2.1%.
• The figures still represent a slowdown from the 4.9% Q/Q SAAR print in 3Q, but the deceleration was a little less pronounced than previously estimated (and the final print was above the expectation of an unrevised 3.2% reading).
• Of particular note in this release was that gross domestic income - which in theory should be equal to GDP - rose by 4.8%, up from 1.9% in the prior quarter and the strongest reading since 4Q21, with domestic corporate profits up sharply.
• This brought the average of GDP and GDI in the quarter to 4.1%, the highest since 4Q21 - and helping to bridge the discrepancy between outperforming GDP and underperforming GDI. This was the first quarter since 2Q 2022 that GDI came in above GDP.
• This gap had been identified by some as potentially pointing to a weaker economy than suggested by the GDP measure - but this has so far not materialized. And note that the prior quarter had already seen an upward revision to GDI in last month's national accounts release (0.4pp to 1.9%).