The Bloomberg consensus estimate for fourth-quarter GDP was 2.0 percent. Instead GDP rose 3.3 percent annualized.
Chart Notes
- Gross Domestic Product (GDP) and Gross Domestic Income (GDI) are two measures of the same thing. GDP measures the value of products produced, and income measures income from sales.
- The numbers are seasonally adjusted and annualized.
- Real means adjusted for inflation.
- The difference between Real GDP and Real Final Sales is a BEA estimate changes in private inventory (CIPI). Inventory nets to zero over time so Real Final Sales is the bottom line estimate of GDP.
- The GDP and GDI numbers should match and do correlate over time. But the difference between the measures is stunning as the next chart shows.
Key Contributions to GDP
- PCE Goods: 0.85
- PCE Services: 1.06
- Non-Residential Fixed Investment: 0.26
- Residential Fixed Investment: 0.04
- Change in Private Inventories: 0.07
- Exports 0.68
- Imports -0.25
- Federal Government: 0.16
- State and Local: 0.40
Personal Consumption Expenditures (PCE)
The increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors were food services and accommodations as well as health care. Within goods, the leading contributors to the increase were other nondurable goods (led by pharmaceutical products) and recreational goods and vehicles (led by computer software).
Government Spending
The increase in state and local government spending primarily reflected increases in compensation of state and local government employees and investment in structures.
Within federal government spending, the increase was led by nondefense spending.
Exports, Fixed Investments, Other
Within exports, both goods (led by petroleum) and services (led by financial services) increased.
The increase in nonresidential fixed investment reflected increases in intellectual property products, structures, and equipment.
GDP and GDI in Billions of Dollars
GDP vs GDI Discrepancy
- Since the third quarter of 2022, GDP rose from 21,851 to 22,673. That’s a gain of 3.8 percent.
- Since the third quarter of 2022, GDI fell from 21,981 to 21,949. That’s a decline of 0.1 percent, but the fourth quarter of 2023 is not yet available.
Unless there is a huge jump in income in the fourth quarter of 2023, the already huge discrepancy will widen.
Instant Gratification
The discrepancy between GDP and GDI is ongoing and massive. That should bear attention. But it doesn’t and won’t.
People like the instant gratification that comes with the initial release of GDP, whether it is positive or negative. But GDI is only released in later revisions.
Debt Soaring Out of Sight
GDP is fueled by both consumer debt and government debt. Regarding government debt, Republicans are in on the deal.
For example, The GOP Supports a Child Tax Credit Boost and Affordable Housing Expansion
Without passing anything but continuing resolutions, we went from a House Speake Kevin McCarthy’s proposal of $1.471 trillion bill to Mike Johnson’s $1.66 trillion bill that does not include, Ukraine, Israel, or the US border with Mexico.
Fueled by Debt
Total consumer credit, revolving credit, and credit card interest rates all hit new record highs in November.
Consumer Credit Hits Record $5 Trillion
For discussion, please see Retail Sales Surge 0.6 Percent, Beating Economist’s Expectations
Consumers keep spending more and more, and much of that spending is online.
Also see How Did Covid Change Your Propensity to Buy Things Online?
All haters: dude where is my recession ?
The debt is a time bomb. But good job pretending everything is OK because you want your team to win.
Regarding the GOP wanting child tax credit and Affordable Housing Expansion: Mortgage Lenders have virtually nothing to pitch except down payment assistance programs and free money to “First Generation” home buyers. Just yesterday Fannie Mae announced a $2,500 grant for buyers with income not exceeding 50% of Area Median Income. That’s not much, but it’s on top of the other down payment assistance schemes – and it can go toward a buyer’s 3% minimum down payment. So it could matter on a cheap condo purchase.
It feels like 2006 and “Alt A” mortgages. Like they’re trotting out what few gimmicks are left (literally free money) to find the last remaining suckers to sustain inflated home values. I think the next gimmick for immigrant buyers will be a free goat at closing.
You know that this NUMBER will be REVISED downward in the next TWO QUARTERS!!!
As soon as the election is over. Just like Obama’s unemployment numbers in 2012.
Google says
Bunch of guesses on different things don’t add up to the same amount, no surprise. But how does an increase in nett personal debt come into it?
Increased consumer debt should increase GDP, but doesn’t seem to be in accounted for in GDI
I looks forward to the massive downward revisions that will be announced 5 minutes after the elections in November.
Who, in their right mind, puts even a modicum of faith in words (or numbers) proposed by the Fed or our “trusted government leaders?” We have miserably failed at transferring a world that values integrity to our kids and grandkids. You want accountability? Look, as I have (embarrassingly), in the mirror.
I find this remarkable. How much of this is explained by inequality? The bottom 50% of households control less than 3% of the nation’s wealth. Tens of millions of people’s lives could become catastrophically worse without impacting the economy.
Agree sir, the rich (top1-10%) are doing fine; growing GDP by spending our stock market bennies (but then who’s buying? Uncle Fed or Uncle Chin?)!
Reminder, wealth isn’t income….wealth requires savings; the freedom we enjoy does not mandate any save … YOLO!
War accounts for 30%of GDP and it goes straight to upper 1%.
Show us how you arrived at that conclusion.
Question: what percentage of government services is provided to the bottom 50% of households vs the top 50%? To get credit for your answer you must include the provision of emergency and medical services.
Bad news for an unemployed pol rooting for a US economic collapse hoping to benefit fpersonally rom the misery of the “little people”. Some great patriot!
The US economy is being held aloft by a $1 T debt increase every quarter. It’s not about rooting for anything. It’s about whether this farce is recognized before the election or after it.
Leftists are unwilling to use the brain power required to understand basic economics. You’re wasting your time.
“Real” means adjusted for fake synthetic “inflation”, not real inflation.
To get the “real real rate” you need to use actual inflation, and there isn’t any, so good luck with that.
Mish, What areas of GDP do you think are being most “overstated” if the GDP/GDI divergence holds true?
That is a good question. Need to think about that
easily could be “everything” thanks to debt…accelerated expenditures/growth. Banks flush thanks to BTFP …for now.
3.3% Rise . . . You got to be kidding . . . Its an election Year !
If the economy has been so great over the past few years, why is life expectancy in a sustained fall? Has any other nation experienced this?
Took a dip with COVID, sustained by anti-vaxxers. US life expectentcy soared with vaccines and improved public hygiene, politicized Luddites have turned the clock back a bit. If you like falling life expectantcy vote RFK Jr!
It’s the so called vaccines along with lockdowns and drug abuse that are shortening life spans
Been a banner year for morticians and funeral homes. Next year even better!
Invest in cancer drug companies too!
NPR pitched an upcoming program today about the huge increase in cancer which – they said – “nobody seems to know why”. I almost drove off the road.
Lol, “experts are baffled”
Leftists (AKA Democrats here in the USA) continue to parrot this garbage. Kevin and the leftists like him represent a clear and present danger to the safety and security of the American people.
Dumb
Because the vaccines are unsafe and effective, as designed.
I fully expect the economy to continue surprise to the upside through most of the year I won’t be surprised by a return to above 4% GDP sometime in the next 3 quarters. Companies as expected are starting to announce layoffs, but it’s still January, I don’t see any sign that this is from higher costs of borrowing. Cutting rates by March would mean one thing: election tampering.
So why would companies announce layoffs if the economy is doing so well? Basically the 2024 election will be a repeat of 2020
Cull the herd … make profits … use AI.
Exactly. I guess Nick doesn’t understand what always happens in January. Layoffs or at least the announcement of them.
Let the good times roll!
We need the shock and awe that only the Bond Vigilantes can deliver.
There are no bond vigilates anymore. The fed will start buying bonds again if yields go up to much. Without the feds complicity our politcal deficit spending whores would be forced into fiscal discipline.
I have bet the opposite and am short 20 year treasuries via TBT. We are only beginning the refinancing of the Treasury. This Spring will not be pretty.
The Dow took off. MSFT popped above BB#3 : Aug 20/27 2021, 305.84/ 296.83 and breached July 18 2023 high @366.78 on the way to $3T. If it can’t MSFT might try it again. AAPL breached $3T, but closed at $2.99T. AAPL 1:1 MSFT. Which one will drop, dumped the most,in 2024.
GDP skewed due to an almost-no-budget deficit-spending government, a surely-under-reported inflation figure and an 8.25% growth in total debt for the duration of Mish’s chart time period. Unchecked spending coupled with undereporting inflation. Everywhere I turn I see products and services’ prices that do not come near the official inflation numbers and, so long as we levitate housing and asset prices and jobs hold up with the retirement of the baby boom, transactionally it can persist. But goodness my is that interest amount starting to get large. However, if we never have a budget nor curtail spending, a deficit there is a surplus elsewhere. Many folks have their hands firmly on the surplus and want no part of the punchbowl being removed.
Commerce Department inflation reports are a farce. GDP is negative after truthful correction for inflation.
I saw that Walgreens wanted $18 for a two pack of Old Spice deodorant. WTF?
Which Walgreens? Goto walmart.
It’s hard to keep in mind one can be directionally correct but timing… who in the hell knows as this is going to go on far longer than anyone expects.
Make it while you can, pay down debt while you can, save it while you can.
Question from someone not fully conscious of GDP on a practical level … as a real estate investor … I am paying far more this year in insurance and property taxes than last year … this is a pattern the last few years and I’ve not always raised rent to keep up. Am I contributing to GDP by paying companies and municipalities more as it cuts into profits?