Macro Developments Since Dec FOMC Meeting: Growth

[Follows discussion on labor developments part i and part ii, plus inflation here]

• Growth measures meanwhile have been a mixed bag, surprisingly strong at a headline level but rapidly cooling in some important components in the Q4 advance release.
• The real GDP beat (2.9% vs cons 2.6%) was heavily boosted by changes in inventories swinging from a -1.2 to +1.5pps contribution. Importantly, personal consumption confounded expectations of an acceleration as it surprisingly eased from 2.3% to 2.1% (cons 2.9%) whilst the drag from private investment intensified from -0.6pps to -1.2pps, its largest since the pandemic.
• The investment hit came as non-residential investment broadly paused after a strong Q3 whilst residential investment saw more of the same heavy declines (on its own dragging -1.3pps from quarterly GDP growth). The tepid non-residential investment outturn is all the more notable by the sharp slowdown in core durable goods orders, from 7.5% in Q3 to 0.1% annualized in Q4, suggesting little prospects of an uplift in the immediate months ahead.
• Tallying them up and final sales to domestic purchasers (aka final domestic demand) slowed from 1.5% to 0.8% annualized, whilst the private version of this measure of 0.2% annualized was the softest since the pandemic. Being just the advance release it is of course prone to revisions, but for now the net takeaway is that the year ended with a weak patch for underlying demand.