The U.S. economy continued to grow in the fourth quarter thanks to real people and businesses spending more, but no thanks to the federal government.
Data out from the Bureau of Economic Analysis Thursday shows that real gross domestic product — which measures output produced in the United States — grew at a rate of 3.2% in the fourth quarter 2013 and 1.9% across the full year. The “advanced” estimate shows fourth quarter growth relative to the third quarter, when real GDP increased 4.1%. Full year-over-year growth is compared to 2.8% in 2012.
According to the BEA, the increase reflects growth in personal consumption expenditures, exports and fixed investment outside residential, as well as inventory investments from the private sector and local government spending. The gains were partially offset by lower federal government spending and residential fixed income. The rate was also negatively impacted by an increase in imports.
The fastest growing positive impact on the GDP results were exports of goods and services, which gained 11.4% in the fourth quarter, compared to 3.9% growth in the third. On the other hand, federal government consumption and investment decreased 12.6% in the fourth quarter. This compares to a 1.5% decrease in the third quarter and is due in part to the 16 day government shutdown at the start of the quarter.
Last quarter, there was some concern that inventory gains — typically regarded as a less predictive metric — accounted for nearly one-third of the growth. This quarter the change in private inventories added .42 percentage points to the change in GDP, after adding 1.67 percentage points in the third quarter. Inventories increased $127.2 billion in the fourth quarter, after increases of $115.7 billion in the third quarter and $56.6 billion in the second. Real final sales of domestic product — GDP minus change in private inventories — grew 2.8% in the fourth quarter, compared with an increase of 2.5% in the third.
The price index for gross domestic purchases — which measures prices paid by U.S. residents — increased 1.2%. The index was up 1.8% in the second quarter. Real personal consumption expenditures increased by 3.3%, compared to 2% in the third quarter.
The Dow Jone Industrial Average added more than .4% in early morning trading following the release and the S&P gained .8%. On the bond side, the 10-year treasury note yield ticked down to 2.72. The stock gains come after the market closed down Wednesday, partially in response to the Federal Reserve’s decision to further cut back its monthly bond purchases to $65 billion.
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