4th Quarter GDP Slashed 25%

4th Quarter GDP Slashed 25%

on Fri, 28 Feb 2014

The Commerce Department announced Fridaythat its revised estimate of GDP growth in the 4th Quarter was revised down to 2.4% annual growth. Initial estimates had put GDP growth at 3.2%. Economists had expected a downward revision to 2.5%, making Friday's report a disappointment. It is a dramatic drop from the 3rd Quarter estimate of 4.1% growth. 

For the full year, the economy grew by a weak 1.9% in 2013. This is down sharply from the 2.8% growth registered in 2012. The downward revisions in the 4th Quarter numbers reflected smaller than estimated increases in personal consumption and private inventory build-ups. 

The markets and many economists continue to expect an acceleration in economic growth in 2014. Recent data, however, counters this sentiment. The economy did seem to pick up steam in the 3rd Quarter last year, but the year ended with a clear deceleration in the economy. 

One surprise in Friday's report was an increase in inflation higher than initial estimated. Prices increased 1.5% in the 4th Quarter, 25% higher than originally reported. Excluding food and energy, prices rose 1.8% in the quarter, compared to a 1.5% increase in the 3rd Quarter.